The strong start to 2009 ended abruptly with the news that Bank of America has received help from the US Government in the form of a capital injection. In Europe, Anglo Irish Bank was nationalised after the funding situation of the bank deteriorated. Credit indices are a bit wider, although not as much as the poor newsflow would indicate. The primary market is still flooded with new issuance, but so far the market is able to absorb it.
The strong opening to 2009 in the beginning of January was short lived. The problems for banks returned with a vengeance in the US and culminated on Thursday with the announcement of a support package for Bank of America (more on this below). Also Citigroup has once again come under tremendous pressure following speculation that the bank may need a further capital injection (or is about to be nationalised). As a consequence of the turbulence, the two banks decided to bring forward the announcement of their Q4 results to today. The results were worse than anticipated, although for Bank of America it can be attributed to the acquisition of Merrill Lynch.
Still CDS indices have held up reasonably well with iTraxx Europe currently trading at 165bp compared to 160bp last week. The high yield index iTraxx Crossover currently trades at 995bp compared to 960bp last week.
The ECB delivered as expected on Thursday with a 50bp lowering of the interest rate to 2%. Later on the same day the Danish Central bank lowered its interest rate by 75bp and the spread between the Danish and the Eurozone interest rate has thereby narrowed to 1 percentage point.
