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Corporate Credit Swaps in U.S. Rise as IMF Disputes Greek Plan

Nov. 13 (Bloomberg) -- A gauge of U.S. corporate credit risk increased as the International Monetary Fund failed to agree with euro-area finance ministers on a strategy to help Greece bring down its debt load.

The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, climbed 0.5 basis point to a mid-price of 107.1 basis points at 8:25 a.m. in New York, according to prices compiled by Bloomberg.

Uncertainty regarding the resolution of the European debt crisis may heighten investor concern that a global economic slowdown will hinder companies’ ability to repay debt. IMF Managing Director Christine Lagarde took issue with a decision by euro-area finance ministers to postpone the goal of getting Greece’s debt down to 120 percent of GDP by two years, until 2022. European policy makers granted Greece until 2016 to cut the deficit to 2 percent of gross domestic product.

The credit-swaps index typically rises as investor confidence deteriorates and falls as it improves. 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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