Credit stable despite Iraq war

Unlike equities, the credit markets on both sides of the Atlantic are remaining remarkably immune to the changing fortunes of the war in Iraq, mainly because the worst has already been anticipated

Credit markets have reacted with strained calm to the onset of war, with heightened equity volatility shaking only a few sectors.

The outbreak of war saw an initial bounce in spreads, with the euro market tightening 6bp on average and the dollar market tightening 5bp on average. This mirrored the equity markets’ brief rally. But tightening stalled after the invasion campaign experienced setbacks during the first weekend of the conflict: industrials widened by 5–10bp, while autos widened by 10