Gold miners lose their shine

North American gold miners were among the few credits to widen on Wednesday as the market continued to recover from last week's carnage.

The price of gold has fallen sharply in recent days - at $1,230 per ounce, it is now more than 30% lower than levels seen last October. Unsurprisingly, gold miners have suffered as a result and have been some of the worst performers in the second-quarter.

Barrick Gold, in particular, has been in the firing line - its spreads gave up 38bps today to trade at 308bps, the widest level since January 2009.

Barrick has its own set of problems that have affected its credit standing, notably the troubled Pascua-Lama project on the border of Chile and Argentina. The massive mining development has been hit by regulatory issues and costs have ballooned. This helps explain why it trades significantly wider than peers such as Freeport McMoRan.

But it is the plummeting gold price that is the main concern of Barrick investors at the moment. The prospect of the Fed tapering its QE programme sooner rather than later - a view reinforced by yesterday's strong US economic data - is leading many funds to reduce holdings of the precious metal. If this trend continues then Barrick and its peers could face further volatility in the months ahead.

Gold miners aside, the overall tone was positive, with spreads recovering a material chunk of the ground lost last week. The Markit iTraxx Europe index was 9.75bps tighter at 118.5bps, and the Markit iTraxx Crossover was back below the 500bps mark.

After the People's Bank of China reassured the markets yesterday about Chinese interbank liquidity, it was the turn of the ECB to becalm conditions. ECB President Mario Draghi said the central bank's accommodative policy would remain in place for the foreseeable future.

European single names gained from Draghi's comments, with banks among the strongest performers. Standard Chartered stood out after it said it was on course to meet estimates for full-year earnings. Standard has underperformed its peers recently due to its exposure to China, which was once its biggest strength.

But the company was bullish on the government's reform programme and brushed off the problems in the interbank market. Standard's spreads tightened 23bps to 155bps, still more than 70bps wider than where it was trading in early May.

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