Better than expected earnings from Goldman Sachs failed to prevent credit markets sliding backwards slightly in a relatively quiet trading day.

Goldman has a habit of beating consensus estimates, and it would have been a far greater surprise if it had undershot expectations. But the results were solid nonetheless, and continued the trend set by JPMorgan and Citigroup in recent days.

Like the other banks that have reported so far, Goldman's trading and investment banking divisions performed strongly, and the company's earnings per share of $3.70 comfortably beat the $2.89 consensus estimate.

Goldman's CDS spreads tightened initially by 2bps to 136bps, but soon gave back the gains and were trading 1bp wider at 139bps. Morgan Stanley, which reports on Thursday, trades about 12bps wider than Goldman and the two names tend to be highly correlated. This is unlikely to change this week, unless there is an unexpected development.

Johnson& Johnson (24bps, 0), another bellwether name, also beat earnings expectations, but overall it was a mixed day for US credit markets. The Markit CDX.NA.IG index was 0.5bp wider at 77.5bps, with a strong home-builders confidence index tempering the deterioration.

European markets outperformed equities in the morning, but this didn't endure beyond the US open. The Markit iTraxx Europe was 1bp wider at 106bps by mid-afternoon, while the Markit iTraxx Crossover was 3.5bps wider at 427.5bps.

UK home improvement retailer Kingfisher (86bps, -4) was among the strongest performers amid expectations that the scorching weather and the improving housing markets will boost its profits. Kingfisher is scheduled to issue a trading statement next week, and this will be closely watched as a gauge of the UK economy.

On a technical point, Isda published a note yesterday outlining the key changes to CDS definitions and the implementation schedule. The changes will come into effect on March 20th 2014 and encompass a variety of amendments.

However, the two main changes will only apply to new transactions, raising the possibility of a two-tier market. This concern caused the subordinated financial CDS to trade in a distorted manner earlier this year, and it will be interesting to see how the market develops as the implementation date approaches.

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