The recent rally in European credit markets looks like it’s losing a little steam, as companies like VW and National Grid rush to raise money in the bond markets, creating a weight of supply and a lid on any further improvement in spreads.
European credit derivative indices across the board were quoted inside the previous day’s closing levels for the fourth consecutive day. But only after having traded nearly 20bp wider in the case of the Crossover index.
The Markit iTraxx crossover index of the 50 mostly junk-rated CDS – a benchmark for corporate credit sentiment – was quoted at 961bp this morning, inside the 974bp closing level from Wednesday. However, it looked to be edging back to the 1000bp mark, hitting a high spread of 992bp before retracing those loses.
The Main Markit iTraxx index of European investment grade borrowers’ CDS was quoted at 163.75bp, only a bip inside yesterday’s closing level of 164.44bp. It printed at 170.5bp today though according to Markit today.
Initial indications out of the US credit markets this morning are that they are opening wider. The first quote on the Markit CDX North American investment grade index is 202bp, just wide of its 201.8bp closing level.
Overnight the iTraxx Japan CDS index continued its tightening trend, closing at 274.75bp.
Movements in single names within the European investment grade and Crossover indices were relatively muted. JTI Finance continued to be the underperformer of the European investment grade index, quoted now at 51.4bp versus a closing level of 46bp.