JPMorgan to Barclays usher bond shift to stocks

Default Swaps

Elsewhere in credit markets, the cost of protecting corporate bonds from default in the U.S. fell. The Markit CDX North American Investment Grade Index, which investors use to hedge against losses or to speculate on creditworthiness, decreased 2.3 basis points to a mid-price of 85.2 basis points as of 10:41 a.m. in New York, according to prices compiled by Bloomberg.

The index typically falls as investor confidence improves and rises as it deteriorates. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The U.S. two-year interest-rate swap spread, a measure of debt market stress, decreased 0.9 basis point to 16.1 basis points as of 10:42 a.m. in New York. The gauge narrows when investors favor assets such as company debentures and widens when they seek the perceived safety of government securities.

Citigroup Bonds

Bonds of Citigroup Inc. are the most actively traded dollar-denominated corporate securities by dealers today, accounting for 4% of the volume of dealer trades of $1 million or more as of 10:46 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The Bloomberg Global Investment Grade Corporate Bond index has gained 0.32% this month, paring the decline for the year to 1.45%.

Barclays asset-allocation strategists recommended investors be “overweight” U.S. and Japanese stocks “over the medium- term, as we anticipate a gradual migration out of expensive bonds,” according to a May 28 report. Overweight allocations mean investors hold more of the assets than their benchmarks.

Morgan Stanley said for the first time in March that it preferred stocks over debt in a March global strategy outlook.

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