Markit’s Gavan Nolan wrote this CDS report
Markit chart of Dubai 5-year CDS
Credit was playing catch up with equities today after the latter market rallied in response to strong US economic data, solid earnings and a lull in the sovereign situation. Credit caught up later in the session, particularly the Markit iTraxx Europe, which finished around 2.5bp tighter at 91bp. The Markit iTraxx Crossover and HiVol indices struggled all day, though they both gained some ground towards the end of the afternoon. The Crossover closed 3.5bp tighter at 506.5bp, while the HiVol finished 1.5bp wider at 140bp.
Sovereign CDS drifted wider in line with the Markit iTraxx SovX WE index. It was a fairly uneventful day by recent standards, though Greece‘s spreads did blow out 20bp earlier in the session. News that the EU has issued Greece a 30-day deadline to implement radical steps triggered some nerves that the country would fail to meet the ultimatum. However, Greece’s spreads ended the day only slightly wider as sellers entered the market. Dubai, the subject of significant widening late last week, also saw selling interest and ended the day about 20bp tighter at 635bp.
Single names did not share in the positive sentiment, with the majority of the Markit iTraxx Europe constituents widening. Banks and telecoms were among the worst performing sectors, though the widening was fairly broad-based.
North American equity markets were helped by a higher than expected Empire State index for February. The index came in at 24.91, well above the 18 consensus estimate. Along with some solid corporate results, the news boosted the Dow, which was up over 1%. But the Markit CDX IG index was about 0.5bp wider and the single name market was mixed. Energy credits, in particular, underperformed. US REIT Simon Property Group widened after it announced that it had made a $10 billion offer to acquire General Growth Properties, which filed for bankruptcy last year. A combination will create the largest shopping mall operator by far.