The global credit markets were generally impacted by high volatility last week. At the beginning of last week, we saw a massive decline in the oil price, with plummeting share prices in several stock markets.
The gloomy condition of the oil-related HY market prevailed last week. The value of debt issued by HY US energy companies has now decreased to the lowest levels for two decades. The bond prices dipped further to only 56, as the oil price came in at a 12-year low below $28/boe. Although the oil price rebounded to about $32/boe on Friday, it was still 14% lower than at the beginning of the year.
During the week, the Itraxx Main (5yr) tightened 5bp, closing at 93bp, while Itraxx Crossover (5yr) tightened 18bp and closed at 370bp. On Wednesday last week, Itraxx Crossover spiked to 398bp, reaching its highest level since October 2013.
At last week's meeting, the ECB decided that the interest rate on MRO and interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.3% and -0.3%, respectively. In our view, the alleviation in the credit market later in the week can be attributed to Mario Draghi's hints that the ECB may ease monetary policy as early as in its March meeting.
The HY market in Norway is still under pressure due the historically low oil prices. Over the week, the overall activity declined, but we have seen some relatively low-volume issuances of senior bank bonds, covered bonds and utility bonds. The credit spreads of Norwegian financial companies remain stable.
To read the entire report Please click on the pdf File Below