Apr 13 - The earnings season kicks off with credit default swap (CDS) spreads on two major banks tightening and spreads on another bank underperforming, according to Fitch Solutions in its latest earnings commentary.
CDS on JPMorgan Chase & Co. (reporting earnings today) have come in 10% over the past quarter. Spreads for JP Morgan have widened in recent weeks, though according to Author and Director Diana Allmendinger, ‘the spread movement is in line with the broader banking sector.’ CDS liquidity for JPMorgan increased over that time period, moving up six rankings to trade in the seventh regional percentile.
Sentiment appears to be more solid overall for Wells Fargo (also reporting today), with CDS tightening 25%. CDS on Wells Fargo have become slightly less liquid over the quarter, down two rankings to trade in the seventh regional percentile.
The same cannot be said for Citigroup Inc. (reporting Monday), with CDS spreads widening 8% over the past quarter. More glaringly, Citigroup’s CDS have come out 25% over the previous week. With CDS liquidity for Citigroup now trading up in the second regional percentile, ‘the CDS market appears to be questioning the future direction in the price of credit protection on Citigroup’s debt,’ said Allmendinger.
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