Bangkok--23 Mar--Standard & Poor's
Standard & Poor's investment-grade composite spread remained unchanged on Friday at 177 basis points (bps), while its speculative-grade counterpart compressed 3 bps to 594 bps. By rating, the 'AA', 'A', 'BBB', and 'BB' spreads tightened one basis point each to 123 bps, 155 bps, 210 bps, and 425 bps, respectively. The 'B' spread compressed 4 bps to 613 bps and 'CCC' tightened 3 bps to 903 bps.
Industry spreads tightened marginally across the board, with banks and telecommunications tightening by the largest increment of 2 bps each to 243 bps and 285 bps, respectively. Financial institutions, industrials, and utilities compressed one basis point each to 273 bps, 305 bps, and 179 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