U.S. Corporate credit risk drops as europe debt concerns ease

A benchmark gauge of U.S. corporate credit risk fell for a second day as European officials discussed plans to stem the spread of the continent’s debt crisis, reducing investors concerns.

The Markit CDX North America Investment Grade Index, which typically falls as investor confidence improves and rises as it deteriorates, declined 0.7 basis point to a mid-price of 140 basis points as of 1:37 p.m. in New York, according to index administrator Markit Group Ltd. Credit-default swaps on BNP Paribas SA, France’s largest bank, fell 8 basis points to 273 basis points, and swaps on Credit Agricole SA dropped 11.9 basis points to 269.2 basis points at 11 a.m. New York time, according to data provider CMA.

The credit swaps index has declined since officials gathered in Washington last week for the annual meetings of the World Bank and International Monetary Fund. Investors are growing more optimistic that policy makers will take steps to protect European banks, according to Noel Hebert, a credit strategist at Mitsubishi UFJ Securities USA Inc. in New York.

“There’s a degree of comfort coming out of there,” Hebert said in a telephone interview. “It’s feeding into everything else.”

German Chancellor Angela Merkel said yesterday that euro- region leaders must build a firewall around Greece to prevent market attacks on other European states. European Central Bank Executive Board member Lorenzo Bini Smaghi said the ECB will do whatever is necessary to supply sufficient funds to European banks.

Credit swaps 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.