Summary
- Spreads are moving wider
- Macroeconomic disturbances hurt markets
- Global financial stability report from IMF
Headlines from the credit market this week
CDS indices have widened considerably compared with last week. iTraxx Europe investment grade rose 13bp to 97bp while the high yield index has risen 30bp and now trades around 605bp. Following several strong months with macroeconomic surprises mainly on the upside, this week disturbance in the macro space was prevailing. After eight consecutive increases, ISM disappointed with a (although modest) fall. So did the CIPS manufacturing index in the UK. Taking into account the weak Chicago PMI and the very weak US auto sales in September (cash-for-clunkers rebate ended), the markets are set for a bumpy ride in the near future. On the other hand, positive underlying US consumer spending in August (adjusted for cars) and a strong rise in August pending home sales in the US ensured that everything didn’t suddenly go pear-shaped but clearly the direction in the coming months is highly unforeseeable.
The corporate sector was once again active in the primary market with Sanofi-Aventis having both a 5Y and a 10Y issue. Furthermore, Stora Enso carried out a 7Y private placement and Volvo printed USD0.75bn at 365bp over treasuries, which gives a comparable EUR level of around 280bp.
While there were no significant financial issuances, the covered bond market was very active with successful issues from Barclays, Swedbank and Danske Bank.
