TEXT-S&P speculative-grade composite spread remains flat

Oct 4 () - Standard & Poor's investment-grade composite spread tightened by 2 basis points (bps) to 191 bps yesterday, and the speculative-grade composite spread remained flat at 617 bps. By rating, the 'AA' and 'A' spreads tightened by 3 bps each to 128 bps and 163 bps, respectively, and the 'BBB' spread tightened by 2 bps to 232 bps. The 'BB' spread remained flat at 424 bps, the 'B' spread tightened by 1 bp to 642 bps, and the 'CCC' spread tightened by 2 bps to 1,005 bps.

By industry, financial institutions contracted by 3 bps to 270 bps, and banks contracted by 4 bps to 264 bps. Industrials, utilities and telecommunications contracted by 2 bps each to 274 bps, 201 bps, and 297 bps, respectively.

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 211 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 674 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.

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. (New York Ratings Team)

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