Chinese data delivers again

Chinese data over the past two days and a softer US approach to the Syria issue have helped credit spreads to tighten, globally, on Tuesday.

Concerns about China's slowing growth are fading after industrial production figures beat expectations by rising 10.4% year-on-year in the world's second largest economy.

China's export figures had kicked off a credit rally yesterday, increasing 7.2% year-on-year, as opposed to the expected 5.5%.

Credit markets are squeezing as much juice as they can from this positive sentiment as the markets witness an increase in global demand.

China's CDS spreads tightened 3bps today to trade at 80.5bps.They have tightened more than 20bps since last week.

The Markit iTraxx Europe and the Markit iTraxx Crossover indices enjoyed a solid early trading session by trading at 98.13bps (-2.61bps) and 393.73bps (-7.67bps), respectively.

Miners and Banks were the best performers in Europe with Glencore, Credit Agricole, Anglo American and Societe Generale topping the best performing credits table.

Spreads tightened further as the chances of a military intervention by a US-led coalition to Syria became slimmer. US president Barack Obama acknowledged Russia's solution to convince the Assad regime to give up its chemical weapons was a "potentially positive development".

The Markit CDX IG index was trading tighter at 77.26bps (-1.86bps) late in the European session today.

Emerging market sovereigns rallied towards the European close today following the recent drop in oil prices. Ukraine (855bps, -20bps), Indonesia (250bps, -19bps), Malaysia (122.5bps, -7.0bps) and Turkey (226.0bps, -5.6bps) were the best performers.

Obama's speech later today on Syria is well anticipated by the markets.


Akif Ince, Credit Analyst, Markit

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