Summary
- Signs of weakness in the credit market during the week with spreads moving wider
- Fitch downgrades hybrid debt from a number of banks that have received Government support
- Senior Loan Officer survey from Fed continues to show tight lending standards
Headlines from the credit market this week
After last weeks’ disappointing US retail sales equities as well as credit had a weak spell in the beginning of the week. While equity markets have regained the lost ground in the last few days, credit investors seem less convinced and spreads are up from last week. The investment grade CDS index, iTraxx Europe currently trades at 98bp whereas the high yield index, iTraxx Crossover, trades at 630bp. In the cash market, subordinated bank capital has been under pressure during the week. We do not view the numerous downgrades by Fitch (see below) as the reason as the prices fell prior to the announcement. More likely, it is profit taking after the long rally we have had, which has reduced the remaining upside potential considerably.
In the primary market things have been quiet. Activity is likely to pick up significantly over the next few weeks as the summer holiday ends around Europe.
