European credit derivatives prices tightened on Friday as they took their cue from firm equity markets.
Markit’s iTraxx Europe index, which is comprised of 125 European investment grade names, tightened to 152 basis points – 1bp tighter than the Thursday close.
The mainly high-yield Markit iTraxx Crossover index tightened by 7bp to 843bp.
Of the single names, Volvo, the Swedish truckmaker, widened after it cut it cut its sales forecast.
Five-year CDS on Volvo rose more than 30bp to about 365bp. Each basis point is equivalent to the cost of 1,000 euros to insure 10m euros of debt against a bond default.
Flows, however, were very thin, which is typical for a Friday.
On the sovereign front, the UK government‘s credit default swaps continued to edge higher amid growing worries over the country’s rising debt levels. They have risen by 15bp this week to 101bp after closing at 86bp last Friday.
However, Moody’s, the ratings agency, stressed that the UK was not in danger of losing its prized triple A status, in spite of rising debt to GDP ratios. The UK government said in its budget statement on Wednesday that debt to GDP would rise close to 80 per cent from a current 50 per cent.