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U.S. Corporate Credit Swaps Rise as Greek Debt Talks Deadlocked

Nov. 21 (Bloomberg) -- A gauge of U.S. corporate credit risk rose as European finance ministers failed to agree on a debt-reduction package for Greece.

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 0.7 basis point to a mid-price of 102 basis points at 8:11 a.m. in New York, according to prices compiled by Bloomberg.

Investors are concerned that the European debt crisis may slow global economic growth and hinder companies’ ability to repay debt obligations. With creditors led by Germany refusing to put up fresh money or offer debt relief, finance chiefs were unable to scrape together enough funds from other sources to help alleviate Greece’s debt burden, set to reach 190 percent of gross domestic product in 2014.

The credit-swaps index, which reached the highest since July last week, 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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