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CREDIT COMMENTARY
Jan 30, 2014
Earnings provide respite
Solid corporate earnings helped US credit markets outperform their counterparts in Europe and put concerns about emerging markets to one side, at least for now.
Facebook's results overnight easily beat expectations, both on revenues and profits. The social media company doesn't trade in the CDS market, but it has become something of a bellwether due to its ubiquity and public popularity.
But it was a far older company that was the star performer in the US credit markets today. Pitney Bowes, a firm that started out making mail franking machines but has since branched out into digital solutions, posted earnings that comfortably beat consensus estimates. Over the last year, the company has focused on strengthening its balance sheet and sold its management business for $400 million late last year. This bondholder-friendly financial strategy has been rewarded in the CDS market, with spreads tightening dramatically during 2013. They rallied 24bps to 122bps today, making it the standout name in the Markit CDX.NA.IG.
The index itself tightened by 2bps to 70.5bps, comparing favourably with the Markit iTraxx Europe, which tightened by 1bp to 80.5bps. Robust US GDP figures - the economy grew by an annualised rate of 3.2% in the fourth-quarter - may have aided the CDX outperformance.
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