Leveraged loans and high-yield bonds are rated below Baa3 by Moody’s and lower than BBB- at S&P.

Elsewhere in credit markets, the cost of protecting corporate debt from default in the U.S. rose, with the Markit CDX North American Investment Grade Index, which investors use to hedge against losses or to speculate on creditworthiness, increasing 0.6 basis point to a mid-price of 90 basis points at 11:51 a.m. in New York, according to prices compiled by Bloomberg.

The index typically rises as investor confidence deteriorates and falls as it improves. Credit-default 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.

In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings added 0.2 to 116.3.

Rate Swaps

The U.S. two-year interest-rate swap spread, a measure of debt market stress, rose 0.47 basis point to 15.85 basis points as of 11:52 a.m. in New York. The gauge widens when investors seek the perceived safety of government securities and narrows when they favor assets such as company debentures.

Bonds of Fairfield, Connecticut-based General Electric Co. are the most actively traded dollar-denominated corporate securities by dealers today, accounting for 3.8 percent of the volume of dealer trades of $1 million or more, at 11:52 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

More than one-third of dollar-denominated junk bonds were carrying yields below 4.75 percent, the 10-year average rate for investment-grade bonds, on Jan. 31, Barclays data show. That’s up from about 2 percent of the notes carrying such low yields in September 2011, according to the data.

Junk Yields

“High-yield is as overbought as I have ever seen it,” Dan Fuss, whose $22.7 billion Loomis Sayles Bond Fund beat 98 percent of its peers in the past three years, said last month in an interview in London. “This is absolutely, from a valuation point, ridiculous.”