Terror threats push up European credit default spreads

Credit default swap spreads for European corporates started to widen during the later part of this week. Fears of a terrorist attack in London or elsewhere, coupled with generally weak equity markets, started to reduce confidence in the market, traders said.

Mid-week, the credit protection market continued to shake off the general financial malaise and war jitters. Traders said spreads remained fairly resilient as strong technical factors, including continued synthetic collateralised debt obligation issuance, kept spreads relatively tight compared with the equity markets. But from Thursday, credit default bids started to widen across European corporates, pulled by weak credit fundamentals.

Negative credit news also contributed to spread widening. In