Last week we saw a less benign sentiment in the credit markets. Indices widened slightly, reversing several weeks of a tightening trend. The iTraxx main widened by some 2bp ending at +74bp. The high yield index iTraxx Xover widened by 11bp closing at +313bp.
Indices have been weighed down by another round of negative developments in the commodities market, with Brent trading at USD45/bl down 5% over the week. The Bloomberg Base Metals index dropped 3%. Yesterday credit indices were also affected negatively by the Paris terrorist attacks late Friday.
Market sentiment was also weighed down by several Fed officials advocating a December hike, making the markets fear that a US interest lift-off could arrive prematurely and rupture the current weak global growth.
In spite of the slightly downbeat sentiment last week, we have still seen high primary-market activity. This includes a USD hybrid from Vattenfall and several prints in Nordic local currencies.
On the subject of hybrids, S&P last week reinstated the 50% equity treatment on DONG Energy's and Vattenfall's hybrids. This follows the two companies doing an add-on to their documentation, thereby making them compliant with S&P's new way of looking at hybrids. As a consequence of this, all the hybrids in question are now trading back at the levels we saw before S&P's updated view.
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