Bangkok--25 May--Standard & Poor's
Standard & Poor's investment-grade composite spread expanded 3 basis points (bps) to 201 bps, and its speculative-grade counterpart expanded 22 bps to 669 bps. By rating, the 'AA' spread expanded one basis point to 142 bps, 'A' widened 4 bps to 179 bps, and 'BBB' expanded 5 bps to 240 bps. The 'BB' spread widened 15 bps to 499 bps, 'B' expanded 20 bps to 700 bps, and 'CCC' widened 31 bps to 965 bps.
By industry, telecommunications expanded by the largest margin of 12 bps to 329 bps. Utilities widened 8 bps to 208 bps, and banks and industrials expanded 7 bps each to 284 bps and 327 bps, respectively. Financial institutions expanded 6 bps to 297 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