This CDS report was written by Markit’s Gavan Nolan
European credit markets ignored a strong rally in the equity markets today, recognising it as the quarter-end driven phenomenon that it was. The Markit iTraxx Europe index was flat on the day, as was the Crossover. In the main index, tightening names were outnumbered by widening credits by around two to one. UK retailer Marks & Spencer was among the best performers after its sales figures beat forecasts. The company said UK like-for-like sales fell 4.2%, a significant improvement from the previous quarter and better than consensus forecasts. But the figures had little impact on other retailers. Next, a competitor of Marks on the UK high street, was flat today. The insurance sector underperformed, giving back some of the gains it made earlier this month
The pattern was much the same in the US, though the markets were not quite as bullish. Stock indices were up 1-1.5%, while the Markit CDX IG was trading around 197bp, 4bp (2%) wider than yesterday’s close. Like Europe, tightening names were outnumbered comfortably by widening credits. Ingersoll-Rand bucked the trend after it announced financing plans. The industrial services firm said it would be issuing a benchmark-sized amount of senior notes, along with $300 million exchangeable notes and an expansion of its receivables refinancing facility. Proceeds from the issues will be used to repay a bridging loan that matures in June. The company also said it would be cutting its dividend, which should save it a further $140 million a year.