Credit rudderless ahead of FOMC

Credit markets were rudderless as they awaited the outcome of today's Federal Reserve policy decision, due after the European close.

The Federal Open Market Committee is expected to maintain its pace of assets purchases - currently $85bn a month - and keep rates unchanged. A lacklustre ADP employment survey today has probably cemented expectations that the central bank won't taper QE until the first-quarter of 2014, at the earliest.

However, the Fed has proved this year it can be unpredictable, and action this year cannot be ruled out.

Meanwhile, the markets were focused on earnings, and the auto sector in particular. General Motors (160bps, -2) posed better than expected quarterly results, with operating earnings up 15% compared with last year and sales increasing by 3.7%.

North America continued to drive the company's performance, though narrower losses and higher sales at its European sales were another welcome development.

GM's figures followed on from rival Ford's solid results earlier this week, and Chrysler completed the 'Big Three' by announcing a 22% increase in net profit. Chrysler is majority-owned by Fiat, but the Italian firm couldn't match the performance of its US subsidiary - its results were disappointing and the company cut its full-year profit forecast.

Fiat's Latin American business was particularly worrying and net debt was higher than expected. The firm's spreads widened 14bps to 400bps today, but are still trading close to their tightest levels for the year, suggesting that the market is not taking too dim a view of the results.

Overall, the markets were rudderless, with the impending FOMC decision no doubt a factor. The Markit iTraxx Europe was 1.5bps wider at 85bps, though a greater number of the underlying credits tightened than widened.

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