CREDIT COMMENTARY
Jan 03, 2013
Europe pauses for breath
European credit markets are consolidating their gains from the positive reaction to the fiscal cliff deal announced earlier this week.
Investors are aware that further battles between the White House and Congress are only weeks away. Republicans will be smarting from the agreement to raise taxes, and will make every effort to get their own way on spending cuts.
Moreover, a quarrel on lifting the debt ceiling looms, and the uncertainty could trigger volatility in the markets.
The impending US non-farm payrolls report will also cause investors to pause for breath. The jobs report is due tomorrow and will have an important bearing on monetary policy expectations. Initial jobless claims later today will be closely watched for clues on the labour market.
The Markit iTraxx Europe was unchanged on Thursday morning at 106.5bps, with banks widening slightly after their strong rally yesterday.
Outside of Europe, Venezuela's spreads are worth watching amid concerns about the health of President Hugo Chavez. He is being treated for cancer in Cuba, but his condition is unclear. Venezuela's spreads tightened 41bps to close at just over 600bps on Wednesday.
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