Ahold woes keep spreads wide in European credit default market

The European credit derivatives market has remained volatile this week following a series of problems faced by Dutch retailer Ahold. Corporate default swap levels were pushed wider at the start of the week, following revelations about accounting inconsistencies at the Dutch company, and have remained wide. “We are seeing more volatility with good flows,” said one London-based trader. “This seems to have prompted a break away from the very tight prices we have seen since the start of the year.”

Credit protection for Ahold was trading at 37.5/40.5 percentage points upfront. It traded at its widest point on Tuesday, then tightened slightly on Wednesday to 35/40 percentage points upfront. European credit spreads on utilities and retailers were about 3bp to 10bp wider this week. The downgrade by rating agency Moody’s yesterday of Spanish utility Endesa by two notches caused its protection to trade 5bp wider at 120/130bp.

In telecoms, spreads widened yesterday following rumours of a