Despite relatively limited newsflow, the credit market has been extremely weak with spreads moving considerably wider. Also a number of CDSs on sovereigns have moved substantially wider, which illustrates the challenging technical situation in the market. The US auto makers are in severe distress and we are currently awaiting news on whether the Federal Government will provide aid to them.
It has been a rough week for credit (and equity) investors even though the newsflow has been relatively limited. The most important theme during the week was whether or not the three big US auto makers should get aid from the US Government. As we write it is still unclear if the companies will get help. Without help, one or more defaults are very likely to take place as liquidity is becoming a scarce resource for the auto makers. Within the next couple of days we will probably have more details and we think more clarity on this topic is likely to be a credit market mover in the short term.
Currently, the investment grade index, iTraxx Europe, trades at 183bp up from 148bp last Friday. The high yield index, iTraxx Crossover, trades at 920bp up from 814bp last week. During the week we passed the all-time wide levels in indices.
