Global credit markets enjoyed a solid end to the week as the effects of the ECB's rates cuts yesterday became more apparent.

The Markit iTraxx Europe index traded at 91.8bps late Friday afternoon, tightening 3.75bps from yesterday. The Markit iTraxx Europe Senior Financials was another good performer tightening 9.5bps to land at 131bps.

Italian banks led the rally with Intesa Sanpaolo and Unicredit spreads tightening by 21bps and 17bps respectively.

The ECB had yesterday slashed interest rates from 75bps to a record low of 50bps in an attempt to kick-start the Eurozone lagging economy and meet market expectations. The rate cut triggered a rally in European credits yesterday which continued through to today.

In the US payrolls figures were expected to increase by 138,000 in April but actual figures beat expectations comfortably with an increase of 165,000. This implies a drop in unemployment rate from 7.6% in March to 7.5% in April which is a four-year low rate.

North American credit indices responded positively to these figures where the Markit CDX North America IG index tightened 3bps and traded at 71.3bps on Friday late in the session with no particular industry leading.

Moving to corporates, Royal Bank of Scotland chairman, Sir Philip Hampton, announced the UK government may be prepared to sell its shares in the bank back to private investors. RBS spreads tightened significantly to 140bps on Friday following the announcement having closed Thursday at 149.7bps. UK spreads were unaffected by this news and were priced at 47bps late Friday.

Global markets will be hoping to hold onto their gains next week as we progress into the second quarter.

Akif Ince, Markit Credit

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