Bangkok--25 Feb--Standard & Poor's
Standard & Poor's investment-grade and speculative-grade composite spreads expanded yesterday to 190 basis points (bps) and 639 bps, respectively. By rating, the 'AA' and 'A' spreads remained unchanged at 136 bps and 164 bps, respectively, and 'BBB' expanded one basis point to 226 bps. The 'BB' spread widened 7 bps to 462 bps, 'B' expanded 10 bps to 657 bps, and 'CCC' widened 9 bps to 983 bps.
Industrials expanded by the largest margin by industry, widening 2 bps to 328 bps, followed by financial institutions and telecommunications, which widened one basis point each to 298 bps and 302 bps, respectively. Banks and utilities remained unchanged at 266 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:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760