European bonds from financial sector companies were softer for the week, while credit derivatives were little changed on Friday on declining trading as market participants sought to hold on to gains for the year. "Flows in the financials sector have been extremely concentrated on a few issuers, as investors get to terms with new structures like contingent convertibles," Citigroup credit strategists said.
Lloyds Banking Group last month announced plans to issue the new securities as it seeks to plug a gap in its capital. The Citi strategists cited spreads on the iBoxx bank and insurance sector bond indexes, which widened by around 8 and 12 basis points, respectively, for the week, while other sector indexes were slightly tighter.
"Compared to financials, non-financial spreads have remained firm," they said. By 1636 GMT, the investment-grade Markit iTraxx Europe index was at 87.25 basis points, according to data from Markit. That was unchanged from late on Thursday, according to data from BGC Partners. The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 530.25 basis points, 0.25 basis points wider.