European credit derivatives tracked the rally in equities on Monday morning, with the benchmark iTraxx Crossover index tightening 6bp to 267bp, compared with last week’s high of 310bp.
Cash buyers remain wary, said SocGen strategist Suki Mann in a note to clients, and it’s probably still too early to get involved in a big way – but a third consecutive day day of stability helps sentiment.
As the cliche goes: the pioneers get the arrows, the settlers get the land.
But elsewhere, analysts were less upbeat:
“Any strength from here should be used to set short credit trades as we do not believe the worst is over,” wrote Lehman Brothers, while UniCredit’s strategists said the market was divided into two camps:
the ‘dippers’, which argue that everything is over and current levels are a buying opportunity, and the pessimists, who expect ongoing negative headlines from subprimemania.
In single name news, Ford Motor Credit, Ford Motor’s funding arm, was unmoved at 317.5bp despite reports the carmaker was considering selling its Volvo business.