Daily Credit Summary: November 25 - Going For Gold
Spreads closed mixed with IG unch and HY marginally tighter as volumes dried up this afternoon ahead of the holiday. With low volumes in indices and less in single-names and intraday ranges in IG and HY at their lowest in months, picking out themes from today's market action seems useless although we do note that between Dubai and Gold, the economic headlines seemed to be forgotten about.
Indices typically underperformed single-names with skews mostly narrower while IG stuck above yesterday's tights and above its 50-day moving average again. Dispersion was flat.
Tighteners outpaced wideners by around 3 to 2 but only around 10% of names moved by more than 3bps and from midday credit was dead. FINLs outperformed non-FINLs with CONSumer and TMT sectors in IG13 the worst performers. Low beta names underperformed higher beta names. There was some activity in off-the-run HY indices but little worth mentioning as IG was quiet away from s13.
Among the financials, monolines were weak but banks were strong as we note one rather interesting divergence as GS stock sank rather nastily but its CDS rallied 7bps. MS was also 6bps better on the day as its stock fell and we wonder if either is planning on some rights issues anytime soon (maybe to help paydown the TLGP paper?).
Builders were mixed to mostly wider (as stocks rallied) and autos were better. ENRG names were the best performers (hardly a resounding bet on recovery) as Utes outperformed E&P notably.
Stocks went out near their highs of the day managing a small gain on very low volumes as IG went out at its intraday wides and HY mid range but both seeing inside days from yesterday.
MCDX jumped another 6bps today (though illiquid) to over 160bps now (almost 60bps wider than IG).
Across the broader CDS universe, there was no clear credit quality related theme although it did seem like BBs in general outperformed BBB and CCC names with the better rated names generally tighter on the day.
Gaming, Banks, Gas Utilities, and Labs & Equipment Makers were the best industries of the day with Airlines improving as the day proceeded. Capital Goods was weak again (thanks to Transportation names) along with Apparel & Advertising names (interesting going into Black Friday), Food and Beverage, and Builders.
YRCW was again the weakest name as sellers were prevalent. Smithfield has also found itself languishing recently and was upo their with the biggest losers today. Amkor, DHI, AMD (struggling after the Citadel deal), LIZ (look out for Black Friday), and Windstream were also the largest 'relative' underperformers today. SKS (anyone else sense someone putting on a pairs trade with LIZ?) was the best performer as UAL, JBLU, Continental, and AMR all rallied nicely. United Rentals and Quest Diagnostics were also among the best performers of the day.
Spending growing ahead of income seems another recipe for disaster to our simple minds and weak durable goods was upsetting but the ever-confusing initial and continuing claims numbers (and their wonderful world of adjustments) leave us stunned at the euphoric reaction to still high job losses. New home sales picked up more than expected but builders seemed uninterested.
The overnight news saw Dubai sovereign risk rising on Dubai World's efforts to restructure and the two Mid East entities sprung wider - though we note that Dubai World underperformed dramatically. In fact the differential between the two (compared to the last time stress was evident) suggests far less confidence in a bailout working out well this time (or perhaps more confidence in the Dubai risk aspect - we doubt it).
More CBs buying gold from the IMF pushed Gold up and all day we saw a gentle run up over 1180, 1185, and then to over 1190 towards the close. The coinciding moves in the dollar were small until news broke of the money market INflows (as opposed to outflows) and we saw (rather surprisngly) a significant drop in DXY (through the 74.5 support level) and a jump in gold up to 1192 highs for the day. Stocks rallied to the day's highs on the dollar weaknes but spreads had already given up for the day and remained unch.
Today's biggest absolute movers in IG were Xerox Corp. (+6bps), Kraft Foods Inc. (+4.5bps), and Conagra Foods Inc (+3bps) in the wideners, and Metlife, Inc. (-10bps), Quest Diagnostics Incorporated (-9bps), and Hartford Financial Services Group (-8bps) in the tighteners. Today's biggest percentage movers in IG were Conagra Foods Inc (+5.5%), Eastman Chemical Company (+5.41%), and Campbell Soup Company (+5.19%) in the wideners, and Quest Diagnostics Incorporated (-12%), International Business Machines Corp. (-8.22%), and Dominion Resources, Inc. (-6.48%) in the tighteners.
Today's biggest absolute movers in Main were Hannover Rueckversicherung AG (+3.34bps), Compass Group Plc (+2.67bps), and Cadbury Holdings Limited (+2.19bps) in the wideners, and Bertelsmann AG (-6.2bps), Volvo AB (-5.5bps), and BNP Paribas (-3.16bps) in the tighteners. Today's biggest percentage movers in Main were Hannover Rueckversicherung AG (+7.74%), Compass Group Plc (+6.02%), and Cadbury Holdings Limited (+2.79%) in the wideners, and BNP Paribas (-5.04%), Credit Agricole SA (-3.62%), and Bertelsmann AG (-3.52%) in the tighteners.
In the names of the XOver index, today's biggest percentage movers were Havas SA (+4.76%), Infineon Technologies AG (+2.45%), and TUI AG (+1.82%) in the wideners, and Porsche Automobil Holding SE (-30.8%), Nordic Telephone Company Holding ApS (-19.23%), and NXP b.v. (-13.19%) in the tighteners. The largest absolute movers in XOver were TUI AG (+17.74bps), Havas SA (+10bps), and Infineon Technologies AG (+7.83bps) in the wideners, and NXP b.v. (-272.94bps), Seat Pagine Gialle SpA (-195.22bps), and M-real Oyj (-94.51bps) in the tighteners.
In the names of the HY index, today's biggest percentage movers were Smithfield Foods Inc (+6.42%), McClatchy Co./The (+3.26%), and Windstream Corporation (+2.5%) in the wideners, and Saks Incorporated (-4.41%), Boyd Gaming Corporation (-4.28%), and Sanmina-SCI Corporation (-3.99%) in the tighteners. The largest absolute movers in HY were McClatchy Co./The (+51.88bps), Smithfield Foods Inc (+45.64bps), and Neiman-Marcus Group Inc. (+18.69bps) in the wideners, and AMR Corp (-62.85bps), Clear Channel Communications Inc (-62.08bps), and Boyd Gaming Corporation (-48.07bps) in the tighteners.
Commentary compliments of www.creditresearch.com
- CDR LQD 50 NAIG -0.48bps to 92.43 (17 wider - 26 tighter <> 29 steeper - 21 flatter).
- CDX13 IG 0bps to 102.5 ($0 to $99.89) (FV -0.41bps to 108.76) (38 wider - 59 tighter <> 74 steeper - 50 flatter) - No Trend.
- CDX13 HVOL -1.25bps to 185 (FV -0.57bps to 188.11) (7 wider - 13 tighter <> 16 steeper - 13 flatter) - No Trend.
- CDX13 ExHVOL +0.39bps to 76.45 (FV -0.37bps to 84.42) (31 wider - 64 tighter <> 37 steeper - 58 flatter).
- CDX13 HY (30% recovery) Px $+0.38 to $93.63 / -10.8bps to 669.7 (FV -1.94bps to 611.4) (37 wider - 51 tighter <> 53 steeper - 44 flatter) - Trend Tighter.
- ITRX12 Main -1.75bps to 83.75 (FV -0.58bps to 81.84) (34 wider - 80 tighter <> 56 steeper - 68 flatter) - No Trend
- ITRX12 HiVol -3.88bps to 132.25 (FV -1.19bps to 128.78) (7 wider - 23 tighter <> 14 steeper - 16 flatter) - Trend Tighter
- ITRX12 LoVol -1.08bps to 68.43 (FV -0.39bps to 67.3) (27 wider - 68 tighter <> 53 steeper - 42 flatter) - Sideways Trading
- ITRX12 XOver -14bps to 512 (FV -17.13bps to 515.09) (7 wider - 38 tighter <> 28 steeper - 17 flatter) - Trend Tighter
- LCDX12 (65% recovery) Px $+0.2 to $99.5 / -6.39bps to 558.23 - Trend Tighter.
- MCDX12 +6.75bps to 161.75bps. - Trend Wider.
- CDR Counterparty Risk Index fell 2.27bps (-2.28%) to 97.32bps (2 wider - 12 tighter).
- CDR Government Risk Index rose 0.1bps (0.18%) to 56.18bps..
- DXY weakened 0.83% to 74.44.
- Oil rose $1.59 to $77.61.
- Gold rose $17.53 to $1186.93.
- VIX increased 0.01pts to 20.48%.
- 10Y US Treasury yields fell 3.8bps to 3.27%.
- S&P500 Futures gained 0.5% to 1108.6.