Credit markets were mixed on Friday morning. While news of the US government’s plan on Thursday to subsidise mortgage payments provided a slight boost to sentiment, it was overshadowed by gloomy economic news from Germany earlier this morning. Europe’s biggest economy posted a faster than expected GDP decline of 2.1 per cent during the last quarter of 2008; raising alarm bells for the rest of the Eurozone economies.
The iTraxx Crossover index of CDS on junk-rated companies was 7.4bp wider at 1067.6bp on Friday, while the iTraxx main index of investment grade companies was marginally tighter by 0.7bp at 154.2bp, according to Markit. “The cautious mood has diminished volumes, a trader commented.
Air France swung into a third quarter operating loss of €194m, compared with a profit of €311m a year ago. In addition to slumping customer demand, the French airline said it suffered a €288m loss in fuel derivatives contracts during the third quarter. For the nine months to the end of September 2008, net losses totalled €309m after losses from fuel hedging positions amounting to €649m. In CDS markets, credit default swap spreads for Air France widened 30bp-40bp to 485bp -505bp, according to a trader. German peer Lufthansa was 0.5bp wider at 157.7bp-158.1bp, according to Markit.