NEW YORK (Bloomberg) — The risk of owning US corporate debt rose as consumer confidence fell more than forecast and home prices dropped the most in at least six years, trading in credit-default swaps shows.

The CDX North America Investment Grade Series 9 Index, a benchmark for the cost to protect debt, climbed 2.25 basis points to 61.5 basis points, according to Deutsche Bank AG.

Credit-default swaps tied to bond insurers including MBIA rose as Fitch Ratings said some AAA rated securities backed by subprime mortgage bonds will default.

Debt risk is increasing amid concern that the deepening housing slump and record mortgage defaults among borrowers with weak credit will cause bigger writedowns than expected for financial firms. The CDX index has climbed 15.5 basis points since October 12.

Today's "worse-than-expected housing and consumer confidence numbers has spreads testing recent wides," said Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California.

Credit-default swaps are used to speculate on the ability of companies to repay their debt or hedge against the risk they won't. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

The Conference Board's index of consumer confidence dropped to 95.6 this month, the lowest since October 2005, from a revised 99.5 in September, the New York-based group said today. The index fell as home prices in 20 U.S. metropolitan areas slid 4.4 percent in the 12 months ended in August, according to the S&P/Case-Shiller home-price index, which has data back to 2001.

Fitch, a unit of Paris-based Fimalac SA, today said that collateralized debt obligations it gave top AAA ratings less than two years ago will default. Analysts underestimated the correlation between defaults on subprime loans and mortgage bonds based on them, according to Fitch, the third-largest credit rating company. CDOs repackage assets such as loans and bonds into new debt, with varying degrees of risks.

Contracts tied to MBIA's AAA rated bond insurer, MBIA Insurance Corp., rose 21 basis points to 220 basis points, according to CMA Datavision in New York. The contracts are trading at an almost two-month high.

The Armonk, New York-based company last week posted its first ever quarterly loss after the prices of mortgage securities it guaranteed declined.

Contracts on XL Capital Assurance, a unit of Bermuda-based XL Capital, climbed 15 basis points to 401 basis points, CMA prices show. They reached 417 basis points on October 26, the widest since at least April 2005.

Contracts tied to PMI Group, the second-largest mortgage insurer, rose 30 basis points to 325 basis points, prices from broker Phoenix Partners Group in New York show. The Walnut Creek, California-based company posted its first quarterly loss since its 1995 public offering as borrowers were unable to keep up with mortgage payments.

"We haven't hit the bottom yet in housing," Treasury Secretary Henry Paulson said this week at a conference in New Delhi.

Credit-default swaps tied to Merrill Lynch & Co. widened as Chief Executive Officer Stan O'Neal was ousted following the firm's biggest quarterly loss in its 93-year history.

Contracts on New York-based Merrill, the world's biggest brokerage, rose five basis points to 85 basis points, Phoenix prices show. O'Neal, 56, left after five years as CEO following last week's $8.4 billion writedown, mostly for subprime mortgages and CDOs tied to the loans.

Last week, the CDX index reached the widest levels in a month after Merrill said it lost six times more than it had forecast. Merrill is a passive minority investor in Bloomberg, the parent company of Bloomberg News.

Credit-default swaps tied to the mortgage lending unit of Calabasas, California-based Countrywide Financial, the biggest US mortgage lender, climbed 40 basis points to 390 basis points, according to Phoenix.