A gauge of U.S. corporate credit risk rose for a third day,reaching the highest in six months, as concern mounts that theFederal Reserve will start scaling back record bond-buying that hasbolstered debt markets.

The Markit CDX North American Investment Grade Index, acredit-default swaps benchmark that investors use to hedge againstlosses or to speculate on creditworthiness, increased 1.8 basispoints to a mid-price of 94.9 basis points at 12:34 p.m. in NewYork, according to prices compiled by Bloomberg. The gauge, tradingat the highest level since December, has surged 10.8 basis pointssince June 14, heading for its biggest weekly increase since May2012, excluding rolls into new series.

Investors' confidence in corporate debt has plunged since FedChairman Ben S. Bernanke said June 19 that the central bank maypare $85 billion of monthly bond purchases this year and end it inmid-2014 if the economy achieves the Fed's objectives. The Fed'sstimulus measures, known as quantitative easing, have suppressedinterest rates, pushing investors into riskier assets such ascorporate bonds in search of higher yields.

“In a brief period of time you've put a lot of strain on themarkets,” William Larkin, a fixed-income portfolio manager whohelps oversee $500 million at Cabot Money Management Inc., said ina telephone interview from Salem, Massachusetts. “If the Fed actstoo early, it can really hurt.”

The credit-swaps index typically rises as investor confidencedeteriorates and falls as it improves. The contracts pay the buyerface value if a borrower fails to meet its obligations, less thevalue of the defaulted debt. A basis point equals $1,000 annuallyon a contract protecting $10 million of debt.

Bernanke, speaking this week after a two-day meeting of theFederal Open Market Committee, said reducing bond purchases woulddepend on meeting the central bank's employment and inflationthresholds. Policy makers will cut monthly bond purchases by $20billion at the Sept. 17-18 FOMC meeting, according to 44 percent ofeconomists in a Bloomberg survey.

The yield on 10-year Treasury notes climbed to 2.5 percent todayfor the first time since August 2011 and the Standard & Poor's500 Index fell for the third day, touching the lowest since April26.

“You have to expect volatility as the Fed adjusts its profile onquantitative easing as they lead to a more normalized environment,”Morgan Stanley Chief Executive Officer James Gorman said today inan interview. “And that volatility and the Fed actions are afunction of the economy recovering. And a recovering economy does alot of good things for our businesses.”

The risk premium on the Markit CDX North American High YieldIndex rose 2.4 basis points to 466.8 basis points.

The average relative yield on speculative-grade, or junk- rated,debt fell 0.5 basis point to 564.1, Bloomberg data show.High-yield, high-risk debt is rated below Baa3 by Moody's InvestorsService and less than BBB- at S&P.

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