A gauge of U.S. corporate credit risk climbed to the highest level since June 2010 as investors weighed what the Federal Reserve will do to bolster the faltering economy.
The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, added 2.4 basis points to a mid- price of 128.4 basis points as of 8:19 a.m. in New York, according to index administrator Markit Group Ltd.
The credit swaps index, which typically rises as investor confidence deteriorates, has soared from 96.3 basis points at the end of last month as concern mounts that the global economic recovery is fading and as Europe’s sovereign crisis spreads. Fed Chairman Ben S. Bernanke and other central bankers meet this week in Jackson Hole, Wyoming, as U.S. unemployment persists above 9 percent.
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.
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