Corporate Bond Risk Falls on Speculation U.S. to Drive Growth

June 3 (Bloomberg) -- The cost of insuring against default on European corporate bonds fell on speculation recovery in the U.S. economy will bolster global growth.

Credit-default swaps on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield ratings dropped 30 basis points to 553, the lowest level in a week, according to Markit Group Ltd. prices. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments declined 7.5 basis points at 147, CMA DataVision prices show.

Service industries in the U.S. probably expanded in May at the fastest pace in four years while factory orders rose and firings eased, according to Bloomberg surveys of economists. The Labor Department’s monthly employment report tomorrow is forecast to show payrolls climbed by the most since 1983.

“For now it’s all eyes on the positive data out of the U.S. and investors are enjoying basking in its glow,” said Peter Chatwell, a London-based strategist at Credit Agricole Corporate & Investment Bank.

Stocks rose around the world and the euro rose against the dollar on renewed confidence that a stronger U.S. economy will help contain the fallout of Europe’s sovereign budget deficit crisis.

The cost of insuring against losses on Greek government debt dropped 21 basis points to 717, according to CMA. Swaps on Italy declined 11 basis points to 223, Spain fell 12 to 238 and Portugal was 5 basis points lower at 330.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.