Bangkok--23 Feb--Standard & Poor's
Standard & Poor's investment-grade and speculative-grade composite spreads tightened Friday to 190 basis points (bps) and 637 bps, respectively. By rating, the 'AA' spread tightened one basis point to 136 bps and 'A' and 'BBB' tightened 2 bps each to 165 bps and 226 bps, respectively. The 'BB' spread compressed 5 bps to 460 bps, 'B' tightened 6 bps to 652 bps, and 'CCC' compressed 10 bps to 984 bps.
By industry, telecommunications tightened by the largest margin of 4 bps to 304 bps, followed by banks and industrials, which tightened 3 bps each to 265 bps and 328 bps, respectively. Financial institutions and utilities tightened one basis point each to 298 bps and 187 bps, respectively.
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:
David Wargin, New York (1) 212-438-1579,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760