Crossover hits near six-month high

17 Jan, 2008

Spreads on a key index of riskier European credit hit a near 6-month high on Wednesday, as stocks fell on both sides of the Atlantic on fresh concerns about a looming US recession.
By 1600 GMT the Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, hit a near sixth-month high of 422 basis points, according to Markit data, 6 basis points wider versus late on Tuesday. Its investment-grade counterpart, the iTraxx Europe index, rose 2.5 basis points to 69.5 basis points.
"It was a down day but it could have been a lot worse," said Suki Mann, a credit strategist at Societe Generale in London, adding the widening had been contained because many investors had already bought credit indexes to cut their credit exposure.
Hypo Real Estate's bonds traded roughly 100 basis points wider, with a spread of about 700 basis points, a trader said, after the German company on Tuesday announced it would take an unexpected subprime-linked writedown of 390 million euros ($578.4 million).
Elsewhere, default swaps on credit information firm Experian Group recovered from an initial widening to trade 5 basis points tighter at 94.5 basis points, according to Deutsche Bank prices. This was despite Experian saying underlying sales growth had slowed to 2 percent in the third quarter, and warning that tough conditions would continue.
Five-year CDS on Swiss chemicals group Clariant extended over a week of widening, rising 9 basis points to 160 basis points. That price means it costs 160,000 euros a year to insure 10 million euros of the company's debt against default.

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