Bangkok--19 Mar--Standard & Poor's
Standard & Poor's investment-grade and speculative-grade composite spreads compressed marginally yesterday to 179 basis points (bps) and 605 bps, respectively. By rating, the 'AA', 'A', and 'BBB' spreads tightened one basis point each to 126 bps, 157 bps, and 214 bps, respectively. The 'BB' spread compressed 3 bps to 433 bps, 'B' tightened 2 bps to 625 bps, and 'CCC' compressed 5 bps to 922 bps.
Financial institutions tightened the most by industry, compressing 4 bps to 277 bps, followed by banks, which compressed 3 bps to 249 bps. Industrials tightened 2 bps to 310 bps and utilities and telecommunications compressed one basis point each to 181 bps and 291 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:
Jeff Sexton, New York (1) 212-438-3448,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760