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Weekly Credit Strategy Update

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The strong sentiment has returned and spreads are moving tighter

Wed, May 20 2009, 12:23 GMT
by Danske Research Team

Danske Bank A/S


Summary

  • The strong sentiment has returned and spreads are moving tighter
  • Primary market activity continues to be immense and new issues perform
  • We have initiated coverage of Danish utility company DONG Energy

Headlines from the credit market this week

The rally is back in the credit market, fired on by continued high activity and strong performance in the primary market. The investment grade index, iTraxx Europe, currently trades at 123bp down from 133bp on Friday, while the high yield index, iTraxx Crossover, trades at 750bp down from 790bp on Friday. The senior financials index has strongly outperformed the main index in recent weeks and now once again trades at a tighter level (as it should in our view). The good feeling in the market goes hand in hand with lower volatility and the VIX index is currently falling steadily.

The primary market continues to be extremely hot. During the first three days of the week, there have been a large number of new deals including several from the Nordic region. The Danish brewer Carlsberg came to the market with both a EUR and a GBP issue. The bonds tightened by some 40bp after issuance.

Published on  Wed, May 20 2009, 12:32 GMT


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Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

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