Bonds: iTraxx Crossover tightens

European credit spreads tightened on Friday but gave up some gains made in earlier trading after both US President George W. Bush and Federal Reserve Chairman Ben Bernanke said it was not their role to bail out speculators.
By 1635 GMT, the closely watched iTraxx Crossover was 8.5 basis points tighter at 331.5 basis points versus Thursday's close, a dealer said, having traded within a "very small" 5-basis-point-range in the period surrounding Bush's speech. Earlier, the index had traded as tight as 326 basis points, 14 basis points tighter as optimism had built ahead of Bush's speech.
"To be honest, the market's pretty much gone for the weekend," the dealer said, referring also to Saturday marking the start of a three-day weekend in the United States and Canada.
Bush announced proposals intended to prevent homeowners from defaulting on risky mortgages, bolstering equities. European stocks closed higher, whilst the Dow Jones industrial average rose 151.60 points, or 1.15 percent, to 13,390.33 by 1625 GMT.
Roughly an hour earlier than Bush's speech, US Federal Reserve Chairman Ben Bernanke said the Fed would act as needed to limit the impact of financial turmoil on the economy, but would not bail out investors who made poor decisions. "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions," Bernanke said in a speech to a symposium organised by the Kansas City Federal Reserve.
"Bernanke's speech has not been interpreted positively," Willem Sels, head of credit strategy at Dresdner Kleinwort said. "We were at 326 (basis points) before he started speaking and (at 1440 GMT) we're at 330."
He said the focus remained firmly on troubles in the short-dated funding market. "Money market conditions are still not solved therefore short-dated swap spreads are very wide, and until that is solved, I don't think credit's going to recover at all," Sels said.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 70.7 basis points more than similarly-dated government bonds at 1629 GMT, 0.9 basis points more on the day.