This report was written by Markit’s Gavan Nolan
The credit markets tightened today as the price of oil continued to fall. News that Hurricane Gustav had waned and missed most of the major oil installations around the Gulf Coast helped push prices as low as $106 a barrel, though they have since climbed back to $109. The falling oil price triggered a rally in consumer discretionary credits, led by automakers. Peugeot, Volkswagen and Daimler were all tighter on the day, with a weakening euro supporting the gains. The Markit iTraxx Europe index was 2bp tighter at 98.25bp, while the Crossover was trading about 537bp, 13bp tighter on the day.
Tesco was one of the few European names to widen today. The UK supermarket firm announced a new two-part bond offering. The €1.5bn four-year bond will price at 100bp over mid-swaps, while the €1.5bn eight-year tranche will price at 140bp. Both are at the tight-end of the initial guidance but still at higher rates than previous issues.
Spreads in the US were also tighter on the back lower oil prices. The Markit CDX IG rallied by over 2bp to trade around 141bp, with oil refiners and airlines among the obvious beneficiaries of the falling crude price. News that Korea Development Bank has confirmed its interest in investing in Lehman Brothers sent financials spreads tighter.
