A gauge of U.S. corporate credit risk dropped to a two-week low as U.S. factory orders increased in February.
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 2.1 basis points to a mid-price of 87.9 basis points at 11:11 a.m. in New York, according to prices compiled by Bloomberg. That’s the lowest level on an intraday basis since traders started moving positions into a new series of the index on March 20.
Orders placed with U.S. factories increased by 3 percent in February, a Commerce Department report showed today in Washington, beating the 2.9 percent median rise forecast from 64 economists surveyed by Bloomberg. The gain is the biggest since September’s 4.5 percent jump and compares with a revised 1 percent decline in January. Signs of improvement in the U.S. economy may boost investor confidence about companies’ ability to repay debt.
“Factory orders are a little better than expected, and the perception of risk is certainly reduced out here,” Mitchell Stapley, chief investment officer of Fifth Third Asset Management, said in a telephone interview from Grand Rapids, Michigan.
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.
Share Repurchases
Home Depot Inc., the largest U.S. home-improvement retailer, plans to sell bonds in a two-part offering to help fund share repurchases, the company said today in a regulatory filing.
The bond offering will be of benchmark size, typically at least $500 million, said a person familiar with the transaction who asked not to be identified because terms aren’t set.
Atlanta-based Home Depot, which boosted its dividend and announced a $17 billion stock buyback on Feb. 26, intends to issue securities due 2023 and 2043, according to the filing.
The company’s $1 billion of 5.95 percent bonds due 2041 traded March 26 at 127 cents on the dollar to yield 4.29 percent, or 112 basis points more than similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.