Market To Watch: Credit
European credit spreads edged wider and gilts and bunds prices tumbled Thursday, after the US Treasury's 'sloppy' auction which reinforced investors' expectations that the Federal Reserve will have to raise rates sooner rather than later.
The investment-grade Markit iTraxx Europe index and the Markit iTraxx Crossover index, made up of mostly "junk"-rated bonds, were wider compared to Wednesday, signaling increased appetite for credit.
Appetite for issuing bonds seems to have increased among UK banks, according to various press reports.
Asia-focused bank Standard Chartered hired four banks to lead manage the sale of dollar-denominated perpetual hybrid bonds, a source close to the deal told Reuters, while the company managing Britain's stakes in Royal Bank of Scotland and Lloyds Banking Group could sell an "exchangeable bond" in the two banks, according to the Daily Telegraph.
Investors now watch to see if an auction of 30-year Treasurys later on Thursday will add to the pressure on yields shown by Wednesday's auction of 10-year notes.