Credit Swaps in U.S. Hold; Thomson Reuters Sells 3-Part Bonds

A gauge of U.S. company credit risk was little changed as Janet Yellen, the nominee for chairman of the Federal Reserve, said she will maintain stimulus until the economy improves. Thomson Reuters Corp. sold $1.5 billion in debt.

The Markit CDX North American Investment Grade Index, a credit-default swaps measure that investors use to hedge against losses or to speculate on creditworthiness, decreased 0.3 basis point to 71.7 basis points as of 5:17 p.m. in New York, according to prices compiled by Bloomberg.

Yellen, in testimony at her nomination hearing today, said she is committed to promoting a strong economic recovery and will ensure that monetary stimulus isn’t removed too soon. Traders are evaluating when the U.S. central bank may start to reduce its $85 billion of monthly bond purchases that have bolstered credit markets.

“The CDX is marginally tighter as the markets celebrate Yellen’s pro-stimulus comments,” Michael Kraft, a senior money manager at Vanderbilt Avenue Asset Management in New York, wrote in an e-mail.

The swaps index typically falls as investor confidence improves and rises as it deteriorates. 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.

Fragile Recovery

“I consider it imperative that we do what we can to promote a very strong recovery,” Yellen said in response to a question during her testimony today to the Senate Banking Committee in Washington.

“It’s important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero,” she said.

Thomson Reuters, a provider of news and information services, issued $550 million of 1.3 percent notes due 2017 yielding 90 basis points more than similar-maturity Treasuries, $600 million of 4.3 percent, 10-year bonds at a spread of 170 basis points to benchmarks and $350 million of 5.65 percent, 30-year debentures at 195 basis points, according to data compiled by Bloomberg.

Proceeds will be used to redeem the company’s $800 million of 5.7 percent, senior unsecured notes due October 2014, the company said in a statement today.

Thomson Reuters competes with Bloomberg News parent Bloomberg LP in selling financial data and news services.

State Street

Custody bank State Street Corp. may issue $1 billion of 10-year notes as soon as today, according to a person with knowledge of that offering. The debt is expected to be rated A1 by Moody’s, said the person, who asked not to be identified, citing lack of authorization to speak publicly.

The risk premium on the Markit CDX North American High Yield Index, a credit-swaps benchmark tied to speculative-grade bonds, rose 2.6 basis points to 351.3 basis points, Bloomberg prices show. A basis point is 0.01 percentage point.

The average extra yield investors demand to hold dollar-denominated, investment-grade corporate bonds rather than similar-maturity Treasuries decreased 1.6 basis points to 130.2 basis points, Bloomberg data show. The measure for speculative-grade, or junk-rated, debt fell 0.7 basis point to 554.2.

High-yield, high-risk, or junk debt is rated below Baa3 by Moody’s and lower than BBB- at Standard & Poor’s.

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