Bangkok--9 Nov--Standard & Poor's
Standard & Poor's investment-grade and speculative-grade composite spreads widened yesterday to 231 basis points (bps) and 715 bps, respectively, owing largely to a decline in the Treasury yield after the Federal Reserve Bank announced a continuation of near-zero rates in the near term. By rating, the investment-grade spreads widened by an average of 6 bps to 157 bps for 'AA', 194 bps for 'A', and 286 bps for 'BBB'. The speculative-grade spreads expanded by an average of 16 bps, with 'BB' widening to 514 bps, 'B' to 693 bps, and 'CCC' to 1,132 bps.
By sector, industrials expanded by the largest margin of 9 bps to 372 bps, followed by telecommunications, which widened 8 bps to 339 bps. Financial institutions and banks expanded 7 bps each to 391 bps and 308 bps, respectively, and utilities widened 6 bps to 222 bps.
Despite material tightening since their record highs in December 2008, the speculative-grade spread remains range-bound within a default cycle, and the investment-grade spread continues to face pressure from financial institutions and banks. In addition, speculative-grade defaults continue to accelerate, as does the preponderance of credit downgrades. Because of these factors, we expect spreads to remain at their elevated levels for some time as investors, the credit markets, and the economy cautiously tread through the current recessionary period.
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