Daily Credit Summary: May 12 - Plus Ca Change

Provided by www.creditresearch.com

Spreads rallied today with HY outperforming IG but neither IG nor HY able to get down to Monday's tightest levels as we note 3Y continuing to underperform 5Y (albeit both compressing today) as risk seems to be dragged nearer-term and credit is definitely less Utopian than equities.

Today saw the narrowest range day in IG and HY since last Monday (5/3) in IG and HY as it seems we are treading very nervously around these areas. Many clients we talk to are less convicted bullishly or bearishly now and are trying to grab some carry wherever they can or dive down to single-name RV. Even in the latter case, it appears bid-ask spreads are keeping many out for now.

Interesting that S&P Futures saw another 30pt hi-lo range day but IG and HY saw relatively low range days today. SPY was just unable to make it back to the highs from last Wednesday (see below for some perspective) but while IG and HY closed tighter than last Wednesday's tights, they did not make it back to the swing tights from Monday with the late day burst up in stocks unable to make much of dent at all in credit performance though it inched back towards better levels.

Single-name breadth was very positive today with only a handful of names wider and we saw intrinsics outperform in IG and HY (with IG more index arb-based as high beta was outperforming nicely and narrowing the skew). 3s5s flatteners and 5s10s steepeners seemed apparent in a lot runs we saw coming through but of course liquidity was focused in 5Y so it si tough to really tell. Though one thing did stand out and that was some notable steepening (10Y considerably wider) in several of the lower beta credits (even as 5Y rallied) such as YUM, CTL, TWC, MO, BNI, and BA. Higher beta names saw some 10Y outperformance with names such as AA, AIG, and SLM flatter.

All-in-all, a lackluster day for credit that really never got as excited as stocks over what we don't know.

Capital Structure Changes

A huge 82% of single-names agreed on improving credit and equity today and MON 5Y +3bps (+0.46SDs) and Stock -0.56SDs (-1.21%) was the only name in our universe where CDS and equity were both weaker (as RIG inched tighter into the close). Divergences were more balanced with 8% equity better against credit weakness and 10% credit tighter against equity weakness.

All sectors were tighter on the day and all sectors were in agreement higher in stocks on average. Finance and Healthcare saw credit outperforming equity the most today as they rallied. Tech and Basic Materials saw the best equity performance as credit rallied.

In the credit and equity agreeing section, PHM 5Y -25bps (-2.48SDs) and Stock +0.13SDs (0.41%), TOL 5Y -18bps (-2.09SDs) and Stock +0.08SDs (0.22%), NE 5Y -11bps (-1.97SDs) and Stock +0.33SDs (0.79%), MDC 5Y -13bps (-1.53SDs) and Stock +0.07SDs (0.18%), and TWX 5Y -8bps (-1.47SDs) and Stock +0.1SDs (0.19%) saw credit outperforming equity the most. RRI 5Y -13bps (-0.38SDs) and Stock +2.13SDs (7.23%), CNR CN 5Y -1bps (-0.25SDs) and Stock +2.04SDs (2.81%), LPX 5Y -8bps (-0.9SDs) and Stock +2.69SDs (11.51%), Q 5Y -12bps (-0.26SDs) and Stock +2.11SDs (2.87%), and IBM 5Y -2bps (-0.49SDs) and Stock +3.37SDs (4.46%) saw equity outperforming credit the most as both rallied.

In the divergent section, credit outperformers relative to equity weakness were dominated by RYL 5Y -28bps (-2.09SDs) and Stock -0.54SDs (-1.77%), DPL 5Y -8bps (-2.16SDs) and Stock -0.33SDs (-0.47%), DIS 5Y -4bps (-0.82SDs) and Stock -0.92SDs (-1.78%), and BAX 5Y -4bps (-0.94SDs) and Stock -0.78SDs (-1.37%).

Equity outperformance against credit weakness saw the largest divergences in PAA 5Y +4bps (+0.56SDs) and Stock +1.04SDs (1.39%), DD 5Y +1bps (+0.16SDs) and Stock +1.62SDs (3%), MUR 5Y +2bps (+0.36SDs) and Stock +1.86SDs (3.97%), DHR 5Y 0bps (0SDs) and Stock +2.28SDs (3.73%), and TLM CN 5Y 0bps (0SDs) and Stock +2.3SDs (4.28%).

Movers in Detail

Spreads were tighter in the US as all the indices improved. IG trades 7.2bps wide (cheap) to its 50d moving average, which is a Z-Score of 0.9s.d.. At 97.88bps, IG has closed tighter on 81 days in the last 352 trading days (JAN09). The last five days have seen IG converging to its 50d moving average. HY trades 34.2bps wide (cheap) to its 50d moving average, which is a Z-Score of 0.7s.d. and at 539.92bps, HY has closed tighter on 61 days in the last 352 trading days (JAN09).

Indices typically underperformed single-names with skews widening in general as IG underperformed but narrowed the skew, HVOL underperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, HY's skew widened as it underperformed.

28.8% of names in IG moved more than their historical vol would imply as higher vol names outperformed lower vol names by -5.87% to -5.48%. IG's vol is around 68.92% per 1 day period, with average IG single-name vol around 7.29%.
 
The price of investment grade credit rose 0.12% to around 100.09% of par, while the price of high yield credits rose 0.81% to around 98.44% of par. ABX market prices are higher (improving) by 0.16% of par or in absolute terms, 0.63%. Volatility (VIX) is down -2.68pts to 25.64%, with 10Y TSY selling off (yield rising) 5.2bps to 3.58% and the 2s10s curve steepened by 2bps, as the cost of protection on US Treasuries fell 1.34bps to 38.5bps. 2Y swap spreads tightened 3.1bps to 27.25bps, as the TED Spread widened by 0.4bps to 0.28% and Libor-OIS deteriorated 1.6bps to 20.8bps.

The Dollar strengthened with DXY rising 0.48% to 84.869, Oil falling $1.05 to $75.32 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 1.78% today (a 0.89% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $5.09 to $1237.97 as the S&P rallies (1170 1.54%) outperforming IG credits (97.88bps 0.12%) while IG, which opened tighter at 99.38bps, underperforms HY credits. IG13 and XOver13 are -2.5bps and -22.25bps respectively while ITRX13 is -4.37bps to 95.13bps.

Index/Intrinsics Changes

CDR LQD 50 NAIG -5.4bps to 89.29 (0 wider - 49 tighter <> 29 steeper - 21 flatter).

CDR Counterparty Risk Index fell 13.5bps (-9.59%) to 127.26bps (0 wider - 14 tighter).

CDR Government Risk Index fell 7.48bps (-8.44%) to 81.07bps..

CDX14 IG -2.62bps to 97.88 ($0.12 to $100.09) (FV -6.18bps to 99.62) (3 wider - 119 tighter <> 71 steeper - 54 flatter) - Trend Tighter.

CDX14 HVOL -2.75bps to 150 (FV -10.71bps to 0) (0 wider - 30 tighter <> 14 steeper - 16 flatter) - Trend Tighter.

CDX14 ExHVOL -2.58bps to 81.42 (FV -4.78bps to 84.56) (3 wider - 92 tighter <> 38 steeper - 57 flatter).

CDX14 HY (30% recovery) Px $+0.81 to $98.44 / -21.2bps to 539.9 (FV -32.88bps to 507.21) (0 wider - 99 tighter <> 62 steeper - 38 flatter) - Trend Tighter.

LCDX14 (70% recovery) Px $+0.5 to $98.13 / -13.83bps to 299.98 - Trend Tighter.

MCDX14 -1.5bps to 148.5bps. - Trend Tighter.

ITRX13 Main -4.37bps to 95.13bps (FV-9.14bps to 93.15bps).

ITRX13 Xover -22.25bps to 460.25bps (FV-32.37bps to 459.86bps).

ITRX13 FINLs -12.5bps to 124bps (FV-19.24bps to 123.85bps).

DXY strengthened 0.48% to 84.87.

Oil fell $1.05 to $75.32.

Gold rose $5.09 to $1237.97.

VIX fell 2.69pts to 25.64%.

10Y US Treasury yields rose 4.8bps to 3.57%.

S&P500 Futures gained 1.54% to 1170.

Single-Name Movers

Today's biggest absolute movers in IG were Duke Energy Carolinas, LLC (+2bps), AT&T Mobility LLC (+1bps), and Honeywell International Inc (+0.5bps) in the wideners, and SLM Corp (-35bps), XL Capital Limited (-27.5bps), and Hartford Financial Services Group (-20bps) in the tighteners. Today's biggest percentage movers in IG were Duke Energy Carolinas, LLC (+3.05%), AT&T Mobility LLC (+2.11%), and Honeywell International Inc (+0.98%) in the wideners, and XL Capital Limited (-16.67%), Quest Diagnostics Incorporated (-13.71%), and Johnson Controls Inc (-12.82%) in the tighteners.

In the more financial-heavy CDR NAIG LQD 50 index, sentiment is bullish with 0 wider to 49 tighter, and 29 steeper to 21 flatter as 10 of the 50 credits have inverted curves. The biggest absolute movers were Computer Sciences Corp. (0bps), Campbell Soup Company (-1bps), and Autozone Inc. (-1.5bps) in the underperformers, and General Electric Capital Corp (-19bps), Goldman Sachs Group Inc (-17bps), and Xerox Corp. (-10.5bps) in the tighteners. The biggest percentage movers in the CDR NAIG LQD 50 were Computer Sciences Corp. (0%), Autozone Inc. (-1.57%), and Ryder System Inc. (-1.79%) in the underperformers, and Lowe`s Companies, Inc. (-12.22%), Union Pacific Corp. (-12.17%), and Allstate Corp (-11.59%) in the tighteners.

In Main, the biggest percentage movers were GDF Suez (+0.77%), STMicroelectronics N.V. (+0.4%), and Experian Finance plc (0%) in the wideners, and Banco Santander, S.A. (-21.39%), Hellenic Telecommunications Organization SA (-20.25%), and Banco Espirito Santo SA (-20%) in the tighteners.The largest absolute movers in Main were GDF Suez (+0.5bps), STMicroelectronics N.V. (+0.25bps), and Experian Finance plc (0bps) in the wideners, and Banco Espirito Santo SA (-90bps), Hellenic Telecommunications Organization SA (-40.5bps), and Banco Santander, S.A. (-35.37bps) in the tighteners.

The biggest percentage movers in XOver were Unity Media GmbH (-1.72%), UPM-Kymmene Oyj (-2.26%), and Societe Air France (-2.82%) in the wideners, and GKN Holdings Plc (-16.27%), ITV plc (-12.5%), and Fiat SpA (-12.42%) in the tighteners.The largest absolute movers in XOver were Cognis GmbH (-5bps), UPM-Kymmene Oyj (-6bps), and Unity Media GmbH (-10bps) in the wideners, and ONO Finance, PLC (-95.18bps), Seat Pagine Gialle SpA (-93.84bps), and BCM Ireland Finance Ltd (-93.17bps) in the tighteners.

In the names of the HY index, today's biggest percentage movers were Iron Mountain Incorporated (0%), Weyerhaeuser Co (-1.93%), and HCA Inc (-2.15%) in the underperformers, and ArvinMeritor Inc (-11.49%), Host Hotels & Resorts, L.P. (-11.33%), and American Axle & Manufacturing Inc (-11.21%) in the tighteners. The largest absolute movers in HY were Iron Mountain Incorporated (0bps), Weyerhaeuser Co (-3.25bps), and Temple-Inland Inc. (-4.5bps) in the underperformers, and Realogy Corporation (-101.47bps), Rite Aid Corp (-97.47bps), and First Data Corp (-92.32bps) in the tighteners.

The CDR Counterparty Risk Index Series 2 (of brokers and banks) fell -13.5bps (or -9.59%) to 127.26bps. Morgan Stanley (-4.25bps) is the worst (absolute) performer among the banks/brokers of the CDR Counterparty Index, whilst Morgan Stanley (-2.2%) is the worst (relative) performer. Royal Bank of Scotland Group Plc (-33.5bps) is the best (absolute) performer among the banks/brokers of the CDR Counterparty Index, and Royal Bank of Scotland Group Plc (-17.63%) is the best (relative) performer.

The CDR Aussie Index fell -0.05bps (or -0.06%) to 88.16bps. Qantas Airways Ltd (7.54bps) is the worst (absolute) performer, whilst CSR Limited (9.99%) is the worst (relative) performer. Westfield Trust (-4.59bps) is the best (absolute) performer, and Australia & New Zealand Banking Group Limited (-4.65%) is the best (relative) performer.

The CDR Asian Index fell -1.02bps (or -1.01%) to 100.16bps. Acom Co Ltd (18.52bps) is the worst (absolute) performer, whilst Bank of China (12.52%) is the worst (relative) performer. Petroliam Nasional Berhad (-13.18bps) is the best (absolute) performer, and Petroliam Nasional Berhad (-13.63%) is the best (relative) performer.

Comments

[Sisyphus]

Thanks, Tyler! You da best. Don't let this get into your head, though.

Just LOVE Hoegaarden!!!

[WaterWings]

Where da pweety pichures/

[Grand Supercycle]

Updated DOW charts showing recent buying support:

http://www.zerohedge.com/forum/latest-market-outlook-0

http://stockmarket618.wordpress.com