European corporate credit default swap spreads were wider on Friday, with the Markit Europe iTraxx CDS index at its widest since October last year. Weak equity markets, nervousness over sovereign risk and a more bearish view of the economic outlook have all contributed to the jump wider.
"It's a very obvious 'sell' market," said one CDS trader. "Everyone is being defensive. We've got the US non-farm payrolls later and that could be the icing on the cake." By 1140 GMT, the investment-grade Markit iTraxx Europe index was at 91 basis points, according to data from Markit, 4.50 basis points wider versus late on Thursday, according to data from BGC Partners.
This is the widest for the Europe index since October 7, 2009, when it was at 92.41, according to Markit data. The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 491 basis points, 22 basis points wider.
Concerns over the size of government deficits in the Eurozone's "periphery" have become a key factor driving sentiment. The cost of insuring Greek, Portuguese and Spanish government debt against default rose to record highs on Friday, according to monitor CMA DataVision.
Portuguese five-year CDS hit a record high of 238 bps from 229.5 bps, while Spanish CDS reached an all-time high of 182 bps from 170 bps. Among corporate CDS, Volvo was about 17 basis points wider at around 180 basis points after the Swedish truck maker's fourth-quarter results, where it predicted only a gradual market recovery this year.
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