U.S. corporate credit risk falls for third day

A benchmark gauge of U.S. corporate credit fell for a third day from about the highest levels in more than two years as investor confidence grew that Europe's leaders will stem the region's debt crisis.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell by 4.5 basis points to a mid-price of 132.4 basis points as of 8:21 a.m. in New York, according to index administrator Markit Group Ltd.

Traders pushed the index lower after U.S. Treasury Secretary Timothy F. Geithner predicted that European governments will use more force to resolve the region's crisis. Their leaders “finally get it,” Pacific Investment Management Co.'s Mohamed El-Erian said in a radio interview with Tom Keene and Ken Prewitt on “Bloomberg Surveillance.”

The swap measure, which typically falls as investor confidence improves and rises as it deteriorates, has decreased from 145.1 on Sept. 22. A new version of the index was created on Sept. 20, when six companies were replaced. The prior series traded as high as 135.9 on Sept. 12, which was the highest level since July 2009.

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.