Credit Swaps in U.S. Hold as ADP Jobs Data Miss; BP Sells BondsJessica Summers
A measure of U.S. corporate credit risk held at about a three-month high after a private report showed companies added fewer jobs than forecast. A BP Plc unit sold $2.5 billion of bonds.
The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, decreased 0.1 basis point to 72.8 basis points as of 4:45 p.m. in New York, according to prices compiled by Bloomberg. The gauge reached 74.5 basis points on Feb. 3, the highest closing level since Oct. 15.
Companies added 175,000 workers in January as colder-than-normal weather limited progress in the labor market, according to data today from ADP Research Institute in Roseland, New Jersey. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000.
“That set off the markets on a weak tone,” Anthony Valeri, a market strategist in San Diego with LPL Financial Corp., which manages about $415 billion, said in a telephone interview. “Today’s ADP was really kind of a closely watched early-warning signal on jobs.”
The Labor Department may report in two days that private businesses added 188,000 employees in January after an 87,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.
The swaps gauge typically falls as investor confidence improves and rises as it deteriorates. 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.
BP issued bonds in three parts through its BP Capital Markets unit, including $1 billion of 2.24 percent notes due May 2019 to yield 75 basis points more than similar-maturity Treasuries and $250 million of five-year, floating-rate notes to yield 54 basis points more than the three-month London interbank offered rate, according to data compiled by Bloomberg.
Europe’s second-largest oil company also sold $1.25 billion of 3.81 percent, 10-year securities to yield 115 basis points more than benchmarks, Bloomberg data show.
Proceeds may be used for general corporate purposes and the securities may be rated A2 by Moody’s Investors Service, the data show.
Bonds of Verizon Communications Inc. were the third most actively traded dollar-denominated corporate securities by dealers today, accounting for 2.8 percent of the volume of dealer trades of $1 million or more as of 4:56 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Verizon plans to follow the biggest corporate bond offering in history with a $5.4 billion deal in euros and pounds as the cost of borrowing in Europe relative to the U.S. approaches the lowest in five years. The owner of the biggest U.S. wireless network may sell eight- and 12-year bonds in euros, and 20-year notes in pounds after the $49 billion issue last year, according to a person with knowledge of the matter 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, tied to the debt of 100 speculative-grade companies, narrowed 0.2 basis point to 355.1, Bloomberg prices show. High-yield, high-risk bonds are rated below Baa3 by Moody’s and less than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.
The extra yield investors demand to hold investment-grade corporate bonds rather than government debt was little changed at 113.1, Bloomberg data show.