European credit market indices opened tighter on Thursday morning, helped by early advances in stock markets.
The mood is lighter, as President Barack Obama’s nominee treasury secretary, Timothy Geithner, pledged the government would play an extensive role in stabilising banks. The new administration also said 75 per cent of its planned $825m economic stimulus package should be spent within 18 months to effectively help jobs and taxpayers.
The cost of buying credit protection for US government debt inched up to 73.7bp on Thursday from 72.9bp at the close yesterday, weighed by concerns about the impact that the Obama administration’s planned spending could have on public finances.
After having moved outwards since the beginning of this week, CDS spreads for UK government debt closed in on Thursday and is now indicated at 143.1bp from 147bp at the close of trading in New York yesterday, according to CMA.
The iTraxx main index of investment grade companies was tighter at 167bp-169bp from 176bp yesterday, while the iTraxx Crossover index of sub-investment grade companies moved in by 30bp to 1030bp-1033bp, according to a trader.
Fiat, Italy’s largest carmaker, was among the most active names in the credit derivatives market on Thursday, traders noted. The company is said to be considering a €2bn capital increase as part of a move to merge with French car manufacturer Peugeot Citroen. The cost of purchasing credit protection for Fiat, which was initially quoted higher at the start of trading, has moved to 1100bp-1200bp, around 100bp wider from yesterday’s close, according to traders. CDS spreads for Peugeot was also 35bp wider at 345bp-375bp, traders said.