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updated: 3/11/2013 8:02 AM

Corporate credit swaps in U.S. Rise after reaching two-year low

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Bloomberg News

A gauge of U.S. corporate credit risk climbed from a two-year low after Fitch Ratings cut Italy's credit grade and as Chinese industrial output expanded at the slowest pace since 2009.

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, increased 0.8 basis point to a mid-price of 81.4 basis points at 8:13 a.m. in New York, according to prices compiled by Bloomberg. The measure reached 80.6 basis points on March 8, its lowest level since Feb. 21, 2011.

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Signs of slower global economic growth may stoke investor concern that companies' ability to repay debt will be hampered. Fitch lowered Italy's credit rating one level to BBB+ March 8, citing political paralysis that threatens the country's ability to respond to a recession and the European debt crisis.

Government data in China showed the country's industrial output expanded at a slower pace and lending and retail sales growth slowed.

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.

--With assistance from Victoria Stilwell in New York. Editors: Richard Bravo, Shannon D. Harrington

To contact the reporter on this story: Madhura Karnik in New York at mkarnikbloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5bloomberg.net

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