European corporate credit default swap spreads were mixed on Tuesday, with the iTraxx Crossover index staying above 500 basis points for a second day. Sovereign debt issues remained in the spotlight, with European ministers urging Greece to take extra steps to reduce its debts.
"Credit remains under pressure from Euro zone problems and that's going to continue," said one high-yield CDS trader. By 1610 GMT, the investment-grade Markit iTraxx Europe index was at 91.75 basis points, according to data from Markit, 0.25 basis points tighter versus late on Monday.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 509 basis points, 3 basis points wider. The Crossover index had moved above 500 basis points on Monday for the first time since December 9, when it was about 502 basis points. In the banks sector, Barclays produced strong 2009 profits, which exceeded market expectations.
But five-year senior CDS on the UK bank widened by about 4 basis points to around 121.50 basis points, one trader said. "The headlines are good, but some of the details aren't as rosy," he said.
However, he said the widening on Barclays was due more to general "noise" around UK banks' funding and capital issues that has helped push UK banks' CDS wider since last week. Five-year senior CDS on Barclays, for example, had widened out to 113.72 basis points last Friday from about 101.74 basis points on Thursday, according to Markit data.
Credit analysts at Royal Bank of Scotland were upbeat on Barclays on the back of the results. "We like Barclays, overweight cash and recommend a long CDS (position) especially following recent widening during sovereign uncertainty," they said in a note.
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