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US corporate credit risk reaches 2015 high on Greece turmoil

Wednesday, July 8, 2015 - 07:26

[NEW YORK] A gauge of US corporate credit risk rose to its highest level this year as the Greek crisis increasingly rattles investors.

The cost to insure against losses as measured by the Markit CDX North American Investment Grade Index rose as much as 2.5 basis points Tuesday to 74, its highest intraday level since Dec 17. The index was at 73.7 at 11.16 am in New York (11.16pm Singapore time). In addition, the Markit CDX high-yield index rose as much as 10 basis points to 367.7, the highest since June 18. A basis point is equal to 0.01 of a percentage point.

The rising indexes signal that investors are worried that Greece and its European creditors won't be able to reach an agreement to solve the country's debt crisis, according to Brian Reynolds, chief market strategist for New Albion Partners in New York.

"People are reaching for protection because they're literally frightened about what's going to happen," Mr Reynolds said in a telephone interview.

The Greek people voted on Sunday to reject terms of a proposed debt offer from European leaders. Greek officials said they will offer their own economic proposals in an attempt to restart aid talks. German Chancellor Angela Merkel said there are "only a few days" left to reach a deal.

Beyond the Greece worries, however, Mr Reynolds believes the high-yield debt market is poised for further growth.

"Once you are past Greece, you are going to see a more intense credit boom," he said. "If the jitters continue, that's going to make the credit market more attractive to the pensioners."

BLOOMBERG

Read more on the Greek crisis here

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