European credit default swaps were slightly wider on Tuesday after recovering from an early morning slump as shares rallied on data showing gains in US house prices and consumer confidence. By 1438 GMT, the investment-grade Markit iTraxx Europe index was at 90 basis points, according to data from Markit, 1 basis point wider versus late on Monday.
Earlier it had widened by 3 basis points. The Markit iTraxx Crossover index, made up of 44 mostly "junk"-rated credits, was at 585 basis points, 3 basis points wider, versus 13 basis points earlier in the day.
Banc of America Securities-Merril Lynch analysts said in a note that European credit markets were seeing increased risk appetite again, with the iTraxx Main and Crossover indices below their key 90 and 600 basis points levels respectively, both bordering on lows for the current series.
"The move tighter in spreads has been supported by signs of an economic rebound in H209," they said. But Barclays Capital analysts warned that CDS spreads could potentially overshoot the data, leaving them susceptible to downside surprises.
Among individual names, the 5-year CDS on the senior debt of French investment bank Natixis were around 15 basis points tighter at less than 190 basis points, a trader said. French newspaper Les Echos earlier reported that owner retail bank BPCE would guarantee billions of euros of toxic assets at the loss-making bank.
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