CREDIT MARKETS: Bids, New Issues Sink As Buyers Sit Out Drop
The high-grade corporate-bond market faltered Thursday as both domestic and overseas concerns weighed heavily.
Goldman Sachs (GS) 5.375% bonds due 2020 were last quoted weaker by 19 basis point at 275 basis points over Treasurys, and remained the most actively traded high-grade security this week, according to MarketAxess.
Risk premiums across most other sectors were wider by double digits, but the banking and finance sector took the most hits, a result of failure so far to bring financial-regulation overhaul to a vote in the U.S. Senate. Late Thursday afternoon, the Senate cleared the way for a final vote, possibly as soon as Thursday evening
"U.S. financials are being hit by the political risk from Washington," said Scott MacDonald, head of research at Aladdin Capital Markets. He said some sort of regulatory change is still likely, and market participants are anxious about whether it will increase costs or reduce revenue for banks and brokers.
Meanwhile, the benchmark high-grade credit derivatives index, the Markit CDX North America Investment Grade derivatives IG14 index, left a wide print of 126 basis points, according to Phoenix Partners Group. At last check, the index was quoted at 124 basis points, 10 basis points wider than Wednesday's close. The index measures the cost of insuring a basket of U.S. investment-grade corporate debt against defaults.
