Summary

  • Spreads have tightened considerably during the week

  • Primary market on fire with extraordinarily high issuance activity

  • G20 meeting provides hints on future bank regulation

  • Moody’s downgrades Nordic banks

  • Calculation of Swedish stability fees have changed


Headlines from the credit market this week

CDS spreads are tighter following a general positive sentiment in the financial markets during the week. The investment grade CDS index, iTraxx Europe, currently trades at 85bp whereas the high yield index, iTraxx Crossover, trades at 567bp. The cash market also performed strongly.

After Labor Day, the frantic activity we expected in the primary market materialised. We have seen a few deals printing inside the secondary curves and a number of other deals printing at secondary levels. This is clearly unsustainable and either secondary spreads will have to come in or primary market spreads will have to come out. In the short term we think the former is likely due to the plentiful amounts of cash available in the credit market for the moment. The biggest deal came from Italian utility company, Enel, which printed a total of EUR6.6bn in various tranches and with order books reaching almost 5x the issued amount.