Record wide credit spreads may be near peak-report

NEW YORK, Nov 4 (Reuters) - Record wide credit spreads reached in October may be near a peak as government efforts to stabilize funding markets take hold and the conclusion of the U.S. presidential election removes political uncertainty, CreditSights said on Tuesday in a new report.

Credit spreads, or the extra yield investors demand to hold riskier securities over U.S. Treasuries, reached record wide levels in October for both corporate bonds and credit default swap indices on concerns over a prolonged credit crisis.

The Series 11 CDX.IG index closed last month at about 202 basis points, 34 basis points wider for the month, CreditSights said, while investment-grade bond spreads on average widened 151 basis points to close at 606 basis points, after peaking at 618 in October.

"Predicting that the credit markets have reached a nadir from which they will now begin to recover may seem like foolhardy optimism at this point in the game, but it's a view that arises more from the belief that they could hardly get any worse," CreditSights said.

Still, CreditSights said that even with the distressed pricing levels seen across all asset classes in October, it is difficult to forecast any "substantial rally."

"It is particularly difficult to see much risk appetite emerging before year-end, a time when cash concerns are traditionally heightened," the report said. (Reporting by Walden Siew; Editing by James Dalgleish)