Thursday, February 14, 2008

CDS report: Market rallies on profit-taking


From FT Alphaville:

The cost of protecting European corporate debt against default fell on Thursday, but analysts said the rally was driven by short-sellers taking profits rather than a shift in sentiment.

The iTraxx Europe, which measures the cost of protecting 125 investment-grade credits against default, fell back below the key 100 basis point level, down 5bp to about 98bp. This means it cost €98,000 annually to insure €10m of iTraxx Europe debt over five years.

“I think we’re seeing a short squeeze rather than anything out there that indicates we’re turning a corner,” said Barnaby Martin at Merrill Lynch, adding that uncertainty over the fate of the bond insurers continued to weigh on sentiment.

People in the market took little confidence from Wednesday’s better-than-expected US retail spending figures, with analysts betting that consumer sentiment data released later today would reveal a gloomier picture of the US economy....MORE