Summary
- Spreads continue to move tighter on the back of encouraging signs from the US housing market
- Latvia reaches agreement with IMF staff on loan
- Eurozone lending standards not being tightened as aggressively as previously
Headlines from the credit market this week
During the week there were more signs out of the US that the housing market is moving towards a stabilisation. New home sales were better than expected and the Case-Shiller index showed signs of bottoming out. A stabilisation of the US housing market is likely to make banks more willing to lend as downside visibility is improved. Furthermore, it could improve consumer confidence although the increasing unemployment is still putting somewhat of a damper on this.
The investment grade index, iTraxx Europe, has tightened 7bp compared with last week whereas the high yield index, iTraxx Crossover, has tightened 25bp. The two indices are now trading at 88bp and 620bp, respectively. Cash spreads also continue to move tighter and currently it seems like a one-way street. In the short term, cash spreads will probably continue to tighten due to continued strong investor interest in credit.
A number of banks – including Nordea and SEB in the Nordic region – came to the market during the week and spreads generally tightened significantly after launch. The corporate primary market has been quiet.
