Spreads oscillate wildly as market pushes wider

Credit spreads are continuing to make large oscillations today, with traders making fast markets to avoid being caught offside amid shifting sentiment. The overall move is wider, but iTraxx Europe has bounced several times between 108bp and 113bp, while Crossover broke through the 500bp mark with a 17bp widening to 504bp, but is now back to 498bp.

Sovereigns and financials are again under pressure, with Portugal’s credit default swap consolidating its directional move to an over 400bp level and Italy pushing through the 200bp mark. Spain CDS is, however, moving against the flow and tightening in, despite the country’s borrowing costs rising at today’s debt auction of €2.345 billion in five-year bonds. Spain will pay 3.58% for the issue, with the auction slightly more than two times oversubscribed.

European banks continue to underperform the market, with some major names like Deutsche Bank and UBS more than 10bp wider.

Today’s credit index moves in Europe take up the pattern seen in the US yesterday. CDX IG saw decent volumes, but amid gappy trading the flows generally pushed wider with little reason to rally other than covering-led corrections. Index rolls were said to be well bid and curves saw a general flattening.