Mon, 09/11/2009 - 06:04
Credit default swap markets moved modestly wider over the past month, as tightening momentum over the previous six months began to dissipate, according to GFI Group.
Corporate markets were also more volatile over the month, as Q3 earnings season triggered creditors to reset their expectations.
Volumes remained heavily dominated by financial sectors, as greater visibility brought about by company earnings sparked greater interest in the sector.
CIT Group saw good volume across the term structure, as ongoing uncertainty regarding the restructuring of their existing liabilities – ultimately resulting in bankruptcy filing – maintained liquidity in the name.
Elsewhere, financial services and real estate were the most active sectors.
In European index trading, October saw some initial bid/offer liquidity building for the new iTraxx SovX index and there was clear volatility in the traded five year price of the main iTraxx Series 12.
In corporates, there was a general tightening of traded prices across the board with Virgin Media Finance, Fiat, Metro and Societe Air France five-year all tightening more than 18 per cent through the month and some clear interest in the short end of the Deutsche Telecom curve with bid/offer spreads tightening also here.
Notable exceptions were the five-year CDS for Sainsbury which widened over 25 per cent and some late-month action for Russian Agricultural Bank ten-year which widened nearly 19 per cent in the final week of the month.
Japan remained the most active country in terms of CDS trade across Asia last month, with the banks and auto manufacturers the most liquid sectors. The Bank of Japan announced recently that they were to cease open market purchases of Japanese corporate debt, removing significant support for the market, and placing renewed pressure on the private sector. While this should help support liquidity in Japanese corporate contracts, it has also reintroduced near-term widening across the region, says GFI.
Turkey, Russia and Ukraine were the three most active sovereigns joined by Brazil and Mexico.
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