By Mary Childs
Nov. 26 (Bloomberg) -- Deepening concern that Europe?s fiscal woes remain unresolved pushed the cost of protecting U.S. corporate bonds from default to the highest in five weeks.
The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, added 2.5 basis points to a mid- price of 95.9 basis points as of 12:47 p.m. in New York, according to index administrator Markit Group Ltd.
?Attention is now on ?what?s next,?? Adrian Miller, fixed-income strategist at Miller Tabak Roberts Securities LLC in New York, wrote in an e-mail. ?Portugal?s fiscal and budgetary concerns are now front and center, with an eye on Spain.?
Portuguese Finance Minister Fernando Teixeira dos Santos said European Union governments can?t impose a bailout on his country even as speculation mounts that Portugal will eventually have to ask for one.
The cost of insuring Portuguese, Irish and Spanish government debt against default rose to records earlier today, according to CMA. Credit-default swaps on Portugal were up 21 basis points to 498, Ireland increased 10.6 basis points to 498 and Spain climbed 22.1 basis points to 321.8 in London trading at 11:30 a.m. New York.
European Central Bank council member Erkki Liikanen said in a speech published today that policy makers may keep support measures in place for longer ?if required.?
The Markit index, which typically rises as investor confidence deteriorates and falls as it improves is up from 85.6 on Nov. 5 amid concern the sovereign-debt crisis will spread in Europe and speculation that China will raise interest rates to tame inflation. Swap spreads jumped 4.1 basis points on Nov. 23 after North Korea shelled a South Korean island. The previous closing high for the index was 96.4 on Oct. 22.
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 is 0.01 percentage point and equals $1,000 annually on a contract protecting $10 million of debt.
--Editors: Mitchell Martin, Richard Bedard
To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net
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