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Credit Swaps in U.S. Hold as European Economic Confidence Rises

Jan. 8 (Bloomberg) -- A gauge of U.S. corporate credit risk was little changed after a measure of economic confidence in the euro area advanced and as investors awaited the start of the corporate-earnings season.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, fell 0.3 basis point to a mid-price of 84.7 basis points at 8:03 a.m. in New York, according to prices compiled by Bloomberg.

An index of executive and consumer sentiment in the euro region rose for a second month to 87 from 85.7 in November, the European Commission in Brussels said today. Economists had forecast a climb to 86.3, according to the median of 24 estimates in a Bloomberg News survey. Signs that the recovery is gaining strength may ease investor concern that an economic slowdown will hinder companies’ ability to repay debt. Alcoa Inc. is scheduled to report its fourth-quarter results after the close of trading today, kicking off the earnings season.

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