Swine flu pandemic fears failed to hold back credit markets on Wednesday morning, with CDS screens emitting a green glow all-round. As some analysts predicted, flu fears may have only had a temporary dampening effect on markets with credit markets following equities’ rally.
The Markit iTraxx index of investment grade borrowers’ CDS — contracts which provide a form of insurance against default on debt- – was a touch tighter in early trade at 151.50 basis points. It closed last night at 152.8bps. The Crossover index of mainly junk borrowers’ CDS was also tighter at 849bps versus a closing level of 855bps in the previous session.
Overnight the Japan CDS index continued to grind tighter, in by 11.34bps at 355.09bps. The US credit derivatives markets had a mixed day. The main CDX North America investment grade index closed just a touch wider, 0.4bps at 177.11bps, while the more illiquid US high yield index closed 11bps tighter at 1231.55bps.
CDS on US debt however was more than 10 per cent wider at 44bps, according to Markit. UK CDS breached the 100bps mark again at 101bps, wider by 2bps, but short of highs.