Summary

    • Greek worries continue to spook the credit market
    • Danish Central bank publishes stress test of banking system

    Headlines from the credit market this week

    Concerns about the Greek debt problems continue to weigh on the credit market. Banks in particular are under pressure as they are most correlated to sovereign debt. Thus the iTraxx sovereign index continues to be wider than the senior financial index, which is wider than the non-financial index. Currently, iTraxx Europe trades at 84 whereas the Crossover index trades at 460bp.

    Another indication of the current depressed mood among fixed income investors is that the yield of US 4 week T-bill entered negative territory, which is something not seen since the default of Lehman Brothers. The equity market remains more upbeat and thus we are currently witnessing some decoupling from the fixed income market. Naturally, activity in the primary market has been relatively subdued due to the weak market. For activity to pick up more significantly, issuers are likely to have to bite the bullet and provide some new issue premium.