French banks recover some ground, despite Moody's downgrade

French bank spreads are recovering somewhat this morning despite Moody’s downgrade of two of the biggest institutions yesterday. The rating agency downgraded Credit Agricole and Societe Generale by one notch each to Aa2 and Aa3 respectively. It did not downgrade BNP Paribas, but has kept the bank’s ratings on review for a downgrade. There have been widespread rumours this week of an impending Moody’s downgrade for the sector.

According to Markit, Credit Agricole senior credit default swaps tightened slightly yesterday despite the downgrade, moving in nine basis points to 317bp. It is trading around 310bp today. SocGen senior CDS widened about 4bp yesterday to 427bp, but is in to 422 today.