(The following statement was released by the rating agency)
Oct 3 - Standard & Poor's investment-grade composite spread tightened by 1 basis point (bp) to 193 bps yesterday, and the speculative-grade composite spread tightened by 1 bp to 617 bps. By rating, the 'AA' spread tightened by 1 bp to 131 bps, the 'A' spread remained flat at 166 bps, and the 'BBB' spread tightened by 1 bp to 234 bps. The 'BB' spread tightened by 1 bp to 424 bps, the 'B' spread remained flat at 643 bps, and the 'CCC' spread tightened by 3 bps to 1,007 bps.
By industry, financial institutions and telecommunications tightened by 1 bp each to 273 bps and 299 bps, respectively. Industrials and utilities remained flat at 276 bps and 203 bps, respectively, and banks tightened by 2 bps to 268 bps.
The investment-grade and speculative-grade spreads are both down from their highs reached last October. The investment-grade composite spread is lower than both its one-year moving average of 212 bps and its five-year moving average of 246 bps. The speculative-grade composite spread is lower than both its one-year moving average of 675 bps and its five-year moving average of 752 bps. We expect continued volatility in the near term, especially in the speculative-grade segment, which could result from both positive and negative factors. On the positive side, we expect U.S. corporate defaults to remain below the long-term average in the short term. On the negative side, an increase in volatility in the financial markets, influenced by weakening economic conditions, could continue to weigh on risky assets.
(Caryn Trokie, New York Ratings Unit)