European spreads tightened on Thursday after a better-than-expected Eurozone PMI figure and, according to one analyst, as a delayed response to Wednesday's US house price data. By 1431 GMT, the Markit iTraxx Crossover index, made up of 45 mostly "junk"-rated credits, was at 845 basis points, according to data from Markit, 15 basis points tighter than late on Wednesday.
The investment-grade Markit iTraxx Europe index was at 152 basis points, 3 basis points tighter. Dr Tim Brunne, a credit analyst at UniCredit (HVB), suggested that the tightening in spreads might be a response to Wednesday's house price data from the US Federal Housing Finance Agency. This indicated an annual average decline in US house prices of 6.5 percent in the 12 months to February, far less than what other key indexes suggest.
"Yesterday we saw a strong reaction to that in the equity markets, but the credit tightening was not so strong," he said. Conversely, today European equity markets are flat to down, whilst spreads have tightened sharply. "Maybe we are seeing a delayed reaction to that," he suggested. On Thursday, Eurozone manufacturing and service sector companies gave significantly less downbeat reports than economists had expected, offsetting higher weekly job claims in the US.
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