US CDS markets continued to tighten throughout the course of the past month, pricing-in expectations of further improvements in economic data, according to GFI’s credit derivatives report for September.
Sentiment shifted towards the very end of the month, as weakness in some data points – notably employment statistics – weighed on the market.
Consistent with recent months, financial sectors remained the most heavily active in terms of volume – Financial Services, Insurance (full line) and Real Estate the most active sectors on the month, while at a corporate level, CIT Group saw a robust level of interest, as concerns over the company’s indebtedness, and probability of bankruptcy, sparked greater activity among credit market participants.
In Europe, September saw a significant tightening of prices across the range of five-year CDS, both in the corporate and index markets. There were particularly strong tightening moves in the banking and telecoms sector, but the trend was even seen in previously volatile names such as Gazprom, which tightened 27% across the month. Notable exceptions to this trend: in the telecoms sector British Telecom plc, whose five-year CDS widened by 22% across the month and in the banking sector Banco Espirito Santo widened by 20%, while the entire food products sector also bucked the trend with most five-year prices widening during September.
Financial sectors were also heavily traded in Asia, where Banks and Financial Services, particularly in Japan, attracted the most volume throughout the course of the month. Mizuho and Bank of Tokyo Mitsubishi were among the more active corporate contracts, with greater levels of volume in subordinate, rather than senior, contracts.
Turkey, Russia and Brazil were the three most active sovereigns joined by Mexico and Ukraine.