Bangkok--5 Mar--Standard & Poor's
Standard & Poor's investment-grade composite spread remained unchanged yesterday at 189 basis points (bps), while its speculative-grade counterpart tightened 4 bps to 638 bps. By rating, the 'AA', 'A', and 'BBB' spreads tightened one basis point each to 136 bps, 165 bps, and 224 bps, respectively. The 'BB' spread compressed 3 bps to 462 bps, 'B' tightened 4 bps to 657 bps, and 'CCC' compressed 8 bps to 974 bps.
By industry, financial institutions, banks, industrials, and telecommunications tightened one basis point each to 297 bps, 267 bps, 327 bps, and 301 bps, respectively. Utilities remained unchanged at 188 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