European credit spreads were slightly tighter on Wednesday following US figures showing a sharp drop in jobs but stronger-than-expected factory orders and with modest reaction by share markets, a trader said. By 1511 GMT, the Markit investment-grade iTraxx Europe index was at 104 basis points, according to Markit data, 1 basis point tighter versus late on Tuesday.
The iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was 3 basis points tighter at 530 basis points. By 0625 GMT, the Markit investment-grade iTraxx Europe index was at 102 basis points, according to Markit data, 3 basis points tighter versus late on Tuesday.
The iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was 12 basis points tighter at 521 basis points. Strategists at Deutsche Bank said that while the market would watch the ADP employment figures due for release later in the session, their ability to predict non-farm payrolls data had been weak over the last year.
"Nevertheless, any outsized move will clearly attract attention," they wrote in a note to clients. Also, there was further poor news from the homebuilding sector, with Britain's Taylor Wimpey saying it had been unable to conclude a satisfactory transaction with investors to raise equity. Fitch Ratings in June cut Taylor Wimpey's credit ratings to "junk" status, saying the company potentially faced problems with its debt covenants.
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