General Electric caution signs flashing in credit markets
Investors are snapping up derivatives that protect against losses on GE's debt with cost to insure against a default as high as 211 basis points
New York — General Electric (GE) may still have a relatively solid investment-grade rating, but investors aren’t taking their chances. They’re snapping up derivatives that protect against losses on the company’s debt. The cost to insure against a default by GE climbed to as high as 211 basis points in early trading on Tuesday, 207 basis points to insure GE’s debt against default for five years, credit-default swaps prices (CDS) from Capital Market Authority (CMA) show. That’s almost double what it cost just two weeks ago, and it’s the kind of level that hasn’t been seen for the company since the waning days of the global financial crisis. It’s still well below the peak crisis levels for GE’s finance unit back then (GE Capital’s CDS surged to more than 1,000 basis points in March 2009). But the pace of the increase has been rapid, particularly when compared with the broader investment-grade market. Yields on some of GE’s bonds have also reached levels that are in line with junk-rated...
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