European credit spreads tightened on Wednesday as better-than-expected US durable goods and housing data helped lessen fears about the severity of the global recession. By 1623 GMT, the investment-grade Markit iTraxx Europe index was at 159.5 basis points, according to data from Markit, 2.5 basis points tighter versus late on Tuesday.
The Markit iTraxx Crossover index, made up of 45 mostly "junk"-rated credits, was at 890 basis points, 12.5 basis points tighter. New home sales rose at their fastest pace in 10 months in February while orders for manufactured goods unexpectedly rebounded. It was also another solid day for new bond issues, with deals from UK retailer John Lewis, German carmaker Volkswagen and BHP Billiton.
"We saw top quality, unrated and lesser known or infrequent issuers hit the markets today," said Suki Mann, a credit strategist at SG CIB. "The issues still generally occupy the upper echelons of the investment grade arena, and we are by no means seeing a shift towards financing lower quality borrowers." Lloyds was also in focus after it offered bondholders of its existing Upper Tier 2 debt an exchange into senior unsecured bonds to boost its Tier 1 capital.
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