Credit Swaps in U.S. Drop as Spain Meets Debt Auction Target

Some relief as Spain meets debt-auction target.

A gauge of U.S. corporate debt risk fell as Spain met a debt-auction target, easing concern that the nation would be cut off from the credit markets, and as the Federal Reserve starts a meeting to consider stimulus measures.

     The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark used to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 3.2 basis points to a mid-price of 116 basis points at 12:01 p.m. in New York, according to prices compiled by Bloomberg. Contracts tied to J.C. Penney Co. rose after the retailer announced yesterday that its president was leaving.

     J.C. Penney, the fourth-largest U.S. department-store chain, said president Michael Francis will leave the Plano, Texas-based company, without giving a reason for his departure. The retailer reported a $163 million loss in the first three months of the year, its third straight quarterly loss, as revenue plunged 20 percent.

     Contracts protecting the company’s debt against default for five years increased 2.2 percentage points to 8.4 percent upfront, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. That’s in addition to 5 percent a year, meaning it would cost $840,000 initially and $500,000 annually to protect $10 million of J.C. Penney’s debt.

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