Credit-Default Swaps Benchmark in U.S. Declines for Fifth Day

A gauge of U.S. company credit risk declined for a fifth day to reach a new six-year low as durable-goods orders climbed more than forecast in November.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, fell 0.4 basis point to 62.4 basis points, the least since October 2007, according to prices compiled by Bloomberg. The extra yield investors demand to hold investment-grade corporate bonds rather than government debt narrowed 0.9 basis point to 113.2, Bloomberg data show.

The default-swaps benchmark has fallen 7.6 points since Dec. 17, as data showed improvements in gross domestic product and consumer spending. Orders for durable goods, items meant to last for at least three years, rose 3.5 percent last month, more than the 2 percent advance that was the median estimate of 75 economists surveyed by Bloomberg.

“The fundamentals look very terrific for the U.S. economy,” Margie Patel, a money manager at Wells Capital Management, said today in a Bloomberg Television interview with Betty Liu. Patel said she expects stocks to outperform bonds next year.

The Markit CDX index, which typically falls as investor confidence improves and rises as it deteriorates, has averaged 79.5 basis points this year.

The contracts 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.

The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, fell 2.8 basis points to 307.3, Bloomberg prices show. The index has declined from 340 on Dec. 17. High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and less than BBB- at Standard & Poor’s.

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