Ford Swaps Go On Wild Ride
Credit-default protection on auto giant Ford Motor Credit went on a see-saw ride last week, widening almost 40% at one point before settling down as the week progressed. All of this occurred despite the lack of negative credit news in what traders are calling yet another indication of the volatile credit environment. Instead, traders said it was a technical issue, rumored to be seller of short-dated Ford bonds. Midmarket five-year protection rose to 510 basis points over LIBOR from 380 basis points the previous week, setting a record wide for five-year protection on the credit. It later settled at 430bps late Wednesday in New York. "This is really a pristine name and that kind of move is unprecedented without any news," said one trader. Similar moves occurred in the cash market.
Bruce Clark, senior v.p. at Moody's Investors Service in New York, said there have been no changes in Ford's credit profile to change the rating agency's perspective. And he added that lower bond prices should not pose a liquidity risk to the company, because it has ample access to the securitization market and untapped bank lines. "It was a matter of there being 10 sellers and five buyers," said one trader.