Credit markets remained steady on Wednesday in the absence of any headline driving data releases.

Spreads clung onto their gains since the beginning of the week. Credit indices were on the whole mildly tighter with the Markit iTraxx Europe index trading at 97.7bps towards midday. The Markit CDX Investment Grade index was no different, tightening only 0.5bps to land at 77.5bps early in the North American session.

US president Barack Obama yesterday announced that he had postponed a Congress vote on military intervention in Syria to pursue a "diplomatic path". The markets are yet to see whether the talks will solve the crisis or whether Obama's proposed "targeted strikes" will go ahead.

Emerging market sovereigns were the exception, witnessing some solid spread tightening. Russia and Turkey topped the list to trade at 178bps (-11bps) and 219.5bps (-7.9bps), respectively.

Russia's effective lobbying to prevent a US-led coalition attack on Syria and the re-established faith in the Chinese growth have surely given emerging market sovereign spreads some relief. Spreads had deteriorated recently following a growing suspicion that the Fed will taper its asset purchase programme soon.

In the corporate world, Verizon Communications is expected to issue $49bn worth of bonds today. This is the largest corporate bond issue in history; surpassing the previous record holder Apple by $32bn, should it meet expectations. Verizon's spreads have rallied early during the US session, tightening 8.6bps to land comfortably at 90bps.

Finally, Apple yesterday announced two new iPhones due to be released later this month. The company appears to be targeting Chinese markets with its new iPhone 5C, which is a lower-end version of the high-tech iPhone 5S, which boasts a fingerprint security feature.

CDS on Apple are not very liquid in the market. Spreads currently trade at 28bps and were unchanged by yesterday's announcement.


Akif Ince, Credit Analyst, Markit

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