European credit indices widened

What's on our mind

-General credit market news

During last week's trading, European credit indices widened, albeit at a fairly subdued pace. The index for European investment grade credits (iTraxx main) ended up trading at around 68bp on Friday, compared with around 65bp at the end of the previous week. The index for high-yield credits (iTraxx Crossover) traded around 313bp compared with around 300bp a week earlier.
Following the Greek crisis during the summer, worries about a slowdown in growth in China have been fuelled by the Chinese authorities devaluation of the yuan over the past week. It remains to be seen what the effect will be of the slowdown in Chinese growth on the US Feds decision whether and when to raise US interest rates. However, the China issue seems to have prolonged the summer lull and has in our view been a contributing factor to keeping new issuance from Nordic companies very low over the past week. Overall, we expect liquidity to remain low as investors await the upcoming expected wave of new issuance.
During the ongoing Q2 15 reporting season, our overall impression is that Nordic companies continue to fare well with fairly low leverage and a strong focus on internal cost restructuring. Companies exposed to commodities are in general conservative and continue to monitor macro developments in China closely in order to get a sense of where commodity and end markets are heading.

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