European credit spreads were mixed on Tuesday, partly reflecting a slowdown in primary issuance and uncertainty over whether a rally in secondary market spreads can be sustained. In the primary market, there was just one benchmark bond from the Irish utility Bord Gais Eireann.
Analysts said the secondary market in corporate credit seemed to have lost its lustre. "There is still demand for cash and the market still wants to go tighter, but there is a little spread tightening-induced indigestion setting in," said Suki Mann, credit analyst at Societe Generale. "That is not to say we are at the end of the great spread rally - as some would have us believe."
By 1550 GMT, the investment-grade Markit iTraxx Europe index was at 107.44 basis points, according to data from Markit, 0.56 basis points tighter versus late on Monday. The Markit iTraxx Crossover index, made up of 45 mostly "junk"-rated credits, was at 689.70 basis points, 1.70 basis points wider.
Wall Street stocks were off slightly after reports that 10 US banks have permission to repay government money they received under the US government's rescue programme known as TARP (Troubled Asset Relief Programme). German retailer Arcandor filed for insolvency after the German government rejected requests for state aid.
The retailer is Germany's biggest non-bank casualty of the financial crisis. There was no major economic data to give an update on the state of the US economy, but Arcandor's insolvency illustrated the severity of the economic situation in Germany.