European credit default swap spreads tightened on Monday alongside an extended run of strong gains in equities, partly in response to optimism that the financial sector might be stabilising. By 1625 GMT, the investment-grade Markit iTraxx Europe index was at 182 basis points, according to data from Markit, 12 basis points tighter versus late on Friday.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 1,073 basis points, 17 basis points tighter. The Markit iTraxx five-year senior financials index was at about 179 basis points, about 15 basis points tighter on the day, traders said. Five-year credit default swap spreads on UK bank Barclays were about 13.75 basis points tighter at about 231 basis points, according to Markit data.
Barclays said its trading performance had been strong so far this year, comments that helped boost European and US equities. New issuance picked up again, with borrowers taking advantage of a tightening in spreads. Schlumberger Finance, part of oil services group Schlumberger, joined the list of issuers with plans for a five-year 1 billion euro ($1.29 billion) benchmark bond. And Finnish utility Fortum is planning a dual-tranche bond of around 1 billion euros.
"Thats 95 billion euros for the year-to-date (non-financial corporate investment grade issuance), with the 100 billion euro target expected perhaps this week," Societe Generale said in a research note. In the financial sector, Svenska Handelsbanken came forward with a five-year 1.25 billion euro senior bond, not backed by government guarantee. Germany real estate lender Eurohypo is planning a five-year euro benchmark covered bond.
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