European credit markets drifted aimlessly on Thursday as activity dropped due to the US Thanksgiving holiday.

Despite this, there were several notable pieces of news that the markets will no doubt digest more thoroughly next week. Germany's harmonised CPI rose 0.2% in November and 1.6% on an annual basis. Both figures were higher than expected and the apparent rebound in inflation may dampen expectations that the ECB will introduce negative deposit rates in the near future. The central bank cited low inflation as one of the reasons for cutting rates earlier this month.

But one month's worth of data doesn't make a discernible trend, and money supply figures released by the ECB today suggest that inflation may stay subdued in the eurozone. M3 annual growth pulled back to 1.4% in October, the slowest pace since November 2011. The contraction in loans to the private sector accelerated, and the pace of deleveraging is another factor pointing towards negative deposit rates further easing by the ECB.

Not to be outdone, the Bank of England announced that it was ending the Funding for Lending scheme for households. The resources will now be focused entirely on lending to businesses, rather than residential mortgages that appear to have benefitted from the scheme disproportionately. This is a sensible move given the frothy valuations in large parts of the UK housing market and the high levels of personal debt.

UK homebuilders, unsurprisingly, saw their stock prices fall sharply on the news. Bank CDS spreads, however, were unmoved on the news. The politically-driven Help-to-Buy scheme should still underpin UK house prices, though whether this should be done through a government subsidy is questionable. Barclays was trading at 95bps and RBS at 120bps - both are at their tightest levels since the first-half of 2010.

The Markit iTraxx Europe was 0.5bps wider at 77.5bps, while the Markit iTraxx Crossover was 2.5bps tighter at 312.75bps.

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