From Chris Weston at IG Markets.
Glencore (GLEN) closed down 29.4% in London trade, but the real action is taking place in credit with its Credit Default Swap (CDS) increasing 49%, in-turn putting sizeable stress on BHP and RIO’s 5-yr USD CDS. BHP’s CDS increased 10.8% and we’ve also seen a move in CBA’s too, now at the highest since October 2013 and effectively doubling since earlier in the year.
In the bond market we saw prices getting smashed. I looked at the recently issued notes due for maturity in March 2021 (see below). Price here fell overnight from 81 to 69! GLEN are BBB rated by S&P, which rates them investment grade (IG), although this rating will change soon as you don’t get IG rated bonds trading below 80. The fact Investec have said there is limited value with commodity prices at current levels won’t surprise too many given commentary from other houses such as Goldman’s, but there is no doubt they have spooked the market.
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