Credit Swaps in U.S. Hold; Bristol-Myers Squibb Sells Debentures

A measure of U.S. company credit risk hovered above a six-year low after a Labor Department report showed more Americans than forecast filed applications for unemployment benefits last week. Bristol-Myers Squibb Co. issued $1.5 billion in bonds.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 0.3 basis point to 72.3 basis points at 5:12 p.m. in New York, according to prices compiled by Bloomberg. The benchmark closed Oct. 22 at the lowest level since November 2007 in data that adjust for the effects of the market’s shift to a new version in September.

Investors are assessing economic data to gauge how long the Federal Reserve will refrain from reducing the monetary stimulus that has boosted credit markets. The Fed may delay paring the monthly pace of its bond purchases until March, according to the median estimate of 40 economists in a Bloomberg survey.

“Given the interest-rate outlook, corporate fixed-income looks pretty solid going forward,” Jon Sablowsky, head of trading at Brownstone Investment Group LLC in New York, said in a telephone interview.

The number of Americans filing for unemployment benefits decreased to 350,000 in the week ended Oct. 19 from a revised 362,000 in the prior period, a Labor Department report showed today in Washington. The median forecast of 48 economists surveyed by Bloomberg called for a decrease to 340,000.


The swaps index typically climbs as investor confidence deteriorates and falls as it improves. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Bristol-Myers, the maker of the blood thinner Plavix, sold $500 million each of five-, 10- and 30-year bonds, according to data compiled by Bloomberg.

The offering is graded A2 by Moody’s Investors Service, the ratings company said today in a statement. Proceeds from the sale may be used for general corporate purposes including the repayment of all or a portion of the company’s commercial paper borrowings, according to a filing with the U.S. Securities and Exchange Commission.

Prologis Inc., a San Francisco-based industrial real-estate company, sold $500 million in 3.35 percent notes due 2021 that yield 145 basis points more than similar-maturity Treasuries, Bloomberg data show.

High Yield

The risk premium on the Markit CDX North American High Yield Index, a credit-swaps benchmark tied to speculative-grade bonds, rose 1.6 basis points to 348.8 basis points, Bloomberg prices show.

The average extra yield investors demand to hold dollar-denominated, investment-grade corporate bonds rather than similar-maturity Treasuries rose 0.3 basis point to 125.6 basis points, Bloomberg data show. The measure for speculative-grade, or junk-rated, debt fell 1.3 basis points to 663.9.

Investment-grade debt is rated Baa3 or higher at Moody’s and at least BBB- by Standard & Poor’s.

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