European corporate credit default swap spreads recovered from an earlier sharp widening after a successful bond auction by Spain soothed fears about sovereign risk on Thursday. By 1007 GMT, the investment-grade Markit iTraxx Europe index was steady at 113.75 basis points (bps), according to data from Markit. That is 0.5 bps wider versus late on Wednesday, according to data from BGC Partners.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was 1.25 bps wider at 517.25 bps. Five-year credit default swaps on Spain were 6 bps tighter at 215 bps after the auction, Markit said. The Fed trimmed its gross domestic product growth forecast to 3.0 to 3.5 percent this year from a previous 3.2 to 3.7 percent range, projected in May. China's economy also cooled in the second quarter to 10.3 percent from 11.9 percent in the first quarter, according to the National Bureau of Statistics (NBS).
Spreads are likely to remain volatile as the US earnings seasons gathers pace. In the primary market, British electricals retailer DSG International is the latest company to announce a liability management exercise, whereby issuers buy back existing short-term debt and issue new longer-dated bonds.