European credit spreads little changed

European credit spreads were little changed on Friday after narrowing slightly following stronger-than-expected data for US consumer confidence, new home sales and durable goods orders and as shares rose.
By 1503 GMT, the Markit investment-grade iTraxx Europe index was at 91.5 basis points, according to Markit data, 0.5 basis points wider versus late on Thursday and narrowing from 92 basis points in the morning. The iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was 2 basis points wider at 522 basis points, compared with 527 basis points earlier.
"All in all yesterday reminded us just how fragile sentiment can be and how dependent that sentiment is on the outcome of data and earnings," credit strategists at Deutsche Bank wrote in a note to clients. Credit strategists at UniCredit (HVB) said: "There is still a long way to go. And we would not be surprised if we would lose some of our fellow passengers on this bumpy journey."
Despite the widening, BNP Paribas credit strategist Andrea Ciccione said the spread movement was modest compared to equities, with shares in the United States down over 2 percent at the close. "Equities have lagged, and now they're just catching up. Credit can't get much worse from here, because it's already priced not only for a recession, but maybe for a depression." Ciccione said that a A$830 million ($795 million) loss by National Australia Bank (NAB) further hurt sentiment.
Five-year credit default swaps on NAB were 25 basis points wider 97.5 basis points, RBS credit strategists wrote in a note to clients. Elsewhere in financials, the iTraxx senior financials index widened 3 basis points to 81 basis points. In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 118.9 basis points more than similarly dated government bonds, 0.1 basis points more on the day.
In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 4.375 percent, 4.4 basis points less on the day. The 10-year Bund yielded 4.526 percent, 3.7 basis points less. The 10-year euro swap rate was 4.982 percent.