Bangkok--12 Feb--Standard & Poor's
Standard & Poor's investment-grade composite spread remained unchanged yesterday at 194 basis points (bps), while its speculative-grade counterpart expanded 4 bps to 658 bps. By rating, the 'AA', 'A', and 'BBB' spreads remained unchanged at 139 bps, 167 bps, and 230 bps, respectively. The 'BB' and 'B' spreads widened 3 bps each to 475 bps and 675 bps, respectively, and 'CCC' expanded 10 bps to 1,020 bps.
By industry, banks and telecommunications widened by the largest margin of 3 bps each to 270 bps and 315 bps, respectively. Industrials followed, widening 2 bps to 336 bps. Utilities remained unchanged at 190 bps, and financial institutions tightened by one basis point to 300 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:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760