Spreads on European credit derivatives indexes widened during Thursday morning taking their cue from weaker Asian and European equity markets.
Financial companies led Asia-Pacific stock markets lower on Thursday as worries about further subprime losses in the US emerged. Traders also reacted to a 1.8 per cent fall in the S&P 500 overnight in New York, and worries about lower US home sales and higher consumer debt.
European shares slid ahead of an interest rate decision by the European Central Bank as rising oil prices stoked inflation fears and earnings reports weighed.
As a result the Markit iTraxx Crossover index, which tracks the 50 most liquid speculative grade borrowers, was trading 15 basis points wider at around 446 basis points, or a cost of €446,000 to protect €10m of debt against default over five years. The Crossover closed at around 430 basis points on Wednesday.
The iTraxx Europe index, which tracks the 125 most-liquid names in the investment grade index, widened to around 79 basis points Thursday from a closing level of 74.06 basis points Wednesday, according to Markit.
One of the widest movers in the crossover index was Norwegian paper maker Norske Skogindustrier, against which credit default swap levels reached their widest levels since late March after it posted disappointing results according to MarkIt. Its CDS was quoted 109.6 basis points wider at 1070 basis points.
Anousha Sakoui, FT Capital Markets reporter
