Bangkok--4 Jan--Standard & Poor's
Standard & Poor's investment-grade composite spread tightened 5 basis points (bps) yesterday to 191 bps, while its speculative-grade counterpart expanded one basis point to 611 bps. By rating, the 'AA' spread tightened 4 bps to 129 bps, 'A' tightened 7 bps to 164 bps, and 'BBB' tightened 9 bps to 240 bps. The 'BB' and 'B' spreads remained unchanged at 446 bps and 607 bps, respectively, and 'CCC' tightened 5 bps to 982 bps.
Industry spreads tightened across the board. Financial institutions compressed to 324 bps, banks to 279 bps, industrials to 312 bps, utilities to 194 bps, and telecommunications to 282 bps.
Since their record highs in December 2008, the investment-grade and speculative-grade spreads have tightened in the range of their five-year moving averages of 197 bps and 570 bps, respectively. This is partially attributable to a rough 18% increase in both the moving averages since the beginning of 2009. But, it also reflects a recent optimistic sentiment in the credit markets--particularly the expectations for downgrades and corporate defaults to wane from their current near-record highs and an apparent stabilization in credit quality. We expect credit spreads to compress further, especially for nonfinancials, as the decoupling of systemic to idiosyncratic risk continues to normalize credit pricing. However, financials might remain volatile because of uncertainty regarding loan losses and some banks' ability to raise capital without government support.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
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Analyst Contact:
Diane Vazza, New York (1) 212-438-2760
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