European credit spreads widen

30 Jan, 2009

European credit indexes moved wider on Thursday, putting an end to a two-day rally as a continuous slew of negative news about the slowing global economy added to investor fears. By 1600 GMT, the investment-grade Markit iTraxx Europe index was at 155.75 basis points, according to data from Markit, 3.75 basis points wider versus late on Wednesday.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 1,039.75 basis points, 19.75 basis points wider. Simon Ballard, a senior portfolio manager at Fortis Investments, said the market was "increasingly susceptible to headline risk" as the financial sector depends on government support measures.
He cited as examples headlines out of the World Economic Forum in Davos, Switzerland, as well as the new International Monetary Fund estimate on Wednesday that bank losses would amount to $2.2 trillion versus its previous figure of $1.4 trillion. "Corporate earnings as well will dictate sentiment," he said.

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