European credit spreads tightened on Tuesday, partly reflecting positive sentiment about corporate credit as an asset class. By 1532 GMT, the investment-grade Markit iTraxx Europe index was at 111.46 basis points, according to data from Markit, 3.54 basis points tighter versus late on Monday.
The Markit iTraxx Crossover index, made up of 45 mostly "junk"-rated credits, was at 715.25 basis points, 9.75 basis points tighter. "1H09 ends on a fairly buoyant note, with credit markets seemingly well supported and spreads underpinned," CreditSights said in a note to investors. CreditSights said it expected the credit markets to retain their tightening bias.
"Although we would expect further gains over the summer to be limited as liquidity dries up," it said. Primary market bond issuance by non-financial, investment grade European companies has risen to a new record of about 206 billion euros in the first half, according to credit strategists at ING.
They put this total ahead of the previous record of 205 billion euros for the whole of 2003. Societe Generale noted that the pace of issuance was beginning to slow, but saw more to come in the second half. "We still look at 250 billion euros at year-end...it's looking too conservative a total," Suki Mann, credit strategist at Societe Generale, said in a note.