IG 10 and Other Credit Issues
September 9th, 2008 8:13 am | by John Jansen |The IG 10 is opening a basis point tighter at 138.
Credit Suisse analysts have a very negative view on credit spreads and hold that any near term tightening is an opportunity to reduce exposure.
They note that there has been a substantial Treasury market rally and that will lead to heavy issuance.
According to the analysts the suspension of of dividend payments on preferred shares of FNMA and Freddie Mac will make it more difficult for banks to fund themselves.
In a few days some of the large investment banks will begin releasing earnings. It wont be pretty. The confessional booth should soon open also and firms with less than festive Q3 prospects will probably start issuing earnings warnings.
Credit Suisse analysts believe that credit issues for banks will shift to prime loans and credit cards,exacerbating their woes.
And with quarter end nigh, balance sheet issues should add to pressures on spreads.
