Credit default swaps jumped wider on Solvay, Akzo Nobel, Daimler and BT Group on Thursday following results and a ratings downgrade, while European CDS indexes were little changed. Among a slew of corporate reports, Benelux chemical companies AkzoNobel and Solvay said market conditions were tough and recovery uncertain as their earnings reflected a drop in product prices and they continued to cut costs.
AkzoNobel missed expectations on lower sales, and its pension deficit almost doubled over the previous year to 1.9 billion euros ($2.58 billion). "Spreads in Solvay will continue to be influenced by strategic issues as the group seeks to redeploy funds from the sale of its pharmaceutical operations," Royal Bank of Scotland analysts said in a note.
Five-year CDS widened by nearly 8 basis points to 84.50 bps on AkzoNobel and by 9 bps to 78 bps on Solvay, according to Markit data. Automaker Daimler swung to a worse-than-expected net loss and scrapped its dividend for its first time in 14 years. Its shares fell, and CDS widened by 7.5 basis points to around 116 basis points.
Five-year CDS on British Telecommunications Plc (BT) jumped wider and then quickly recovered. They were 5 basis points wider at 139.5 basis points after earlier widening to more than 153 basis points. Standard & Poor's late on Wednesday downgraded the group's rating one notch to BBB-, the lowest investment grade level, on concerns about the long-term drain on cash from covering its pension deficit.
By 1108 GMT, the investment-grade Markit iTraxx Europe index was at 89 basis points, according to data from Markit. That is 0.5 bps tighter versus late on Wednesday, according to data from BGC Partners. The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 494.50 basis points, 0.5 basis points wider.