European credit default swaps fell on Friday amid improving sentiment about the health of the world economy.
A combination of stabilising economic data, a positive outcome from the G20 gathering and changes to US accounting rules helped buoy the market.
Markit’s iTraxx Crossover index, which is made up of 45 mainly high-yield names and is considered the best gauge to sentiment, narrowed to 919 basis points, or €919,000 to insure €10m of debt annually over five years. It was 5bp lower than the Thursday close.
Markit’s iTraxx Europe index, the investment grade index made up of 125 high-grade names, narrowed to 166bp, 3bp lower than the Thursday close.
However, over the week the indices are higher, reflecting some doubts over the economic outlook in spite of the improved mood.
Flows were also very thin in a market place that is less focused on derivatives.
Many traders said they were holding back from taking positions ahead of the key US non-farm payrolls data.