By 1101 GMT, the investment-grade Markit iTraxx Europe index was at 75.75 basis points, according to data from Markit, 1 basis point wider versus late on Friday, according to data from BGC Partners. The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 416.50 basis points, 1.50 basis points wider. "It was a remarkable deterioration in the positive sentiment last week," Unicredit credit strategists said in a note.
"Spreads widened from an intraday low below 65 basis points (a level last seen in the iTraxx Series 9 in May 2008) to 76 bp on Friday," they said. Unicredit said the turnaround was driven by a disappointing start to the earnings season and the crisis in Greece. Strategists at Barclays Capital also pointed to a poor headline figure for US retail sales on Thursday as acting as a drag on financial markets as well as the start of the earnings season.
"The 4Q 09 net income of $0.74 per share reported by J.P. Morgan Chase & Co reported was above expectations, but tarnished by a net loss in its financial services unit and a drop from 3Q 09 in its fixed income trading unit," Barclays said. More US banks report later this week, including Bank of America Merrill Lynch, Morgan Stanley and Goldman Sachs. There is a holiday in the US on Monday, which is expected to keep activity relatively subdued.
The primary market was quieter after a hectic first two weeks of 2010 for new issues. But the financials/high yield theme that has emerged so far this year continued with Credit Suisse doing a self-led seven-year senior unsecured bond and heavily-indebted yellow pages company Seat Pagine Gialle issuing a 650 million euro ($935.4 million) bond.