Credit Swaps Rise as General Electric Sells $3 Billion of Bonds
A gauge of company credit risk rose for the third straight day as General Electric Co. (GE) sold $3 billion of bonds in three parts.
The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, increased 0.9 basis point to 65.1 basis points as of 4:33 p.m. in New York, after rising 1.5 basis points over the prior two days, according to prices compiled by Bloomberg. The swaps measure typically gains as investor confidence deteriorates and falls as it improves.
General Electric, the borrower with the most debt maturing in 2014 of any U.S. corporate issuer, offered bonds through its GE Capital unit, Bloomberg data show.
The company, based in Fairfield, Connecticut, issued $1.5 billion of floating-rate securities due in two years to yield 23 basis points more than the three-month London interbank offered rate, Bloomberg data show. It also sold $1 billion of 2.3 percent, five-year debt to yield 57 basis points more than similar-maturity Treasuries and $500 million of five-year floaters paying 51 basis points more than Libor.
Total SA (FP), Europe’s third-biggest oil producer, sold $2.5 billion of dollar-denominated bonds in three parts, including $1.25 billion of 3.75 percent securities due April 2024 with a relative yield of 85 basis points, Bloomberg data show. The financing arm of Toyota Motor Corp. (7203) issued $1.8 billion in a two-part sale of floating-rate notes.
Overseas bank lenders borrowing in the U.S. markets yesterday led to the busiest day for the debt in a year, Bloomberg data show. Sales of $7.3 billion from Sumitomo Mitsui Financial Group Inc. (8316) to Rabobank Groep were the most since Jan. 8, 2013.
The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, increased by 2.6 basis points to 315.6, Bloomberg prices show. High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and less than BBB- at Standard & Poor’s.
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.
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