Credit-default swap spreads on DaimlerChrysler widened about 10 basis points last week as traded volumes in the name doubled. One trader said talk of a EUR300 million (USD349 million) bond issue could have been responsible for pushing spreads out to 112bps for mid-market protection Thursday from around 100bps the previous week. There was a general blow out in auto names, which could have been caused by investors buying protection as spreads have been historically tight over recent weeks. Trading volumes rose to USD20 million per day from a typical USD10 million, noted a trader.
Fears about how the recent dollar weakness will affect the auto giant with huge U.S. revenue sources were also thought to be responsible for the widening. One credit analyst said that although a lot of the company's risk is naturally hedged because it manufactures most Chrysler cars in the U.S., when it repatriates dollar-based profit it is still exposed to some foreign exchange risk.
Scott Sprinzen, auto analyst in the corporate ratings division at Standard & Poor's in New York, said there has been no fundamental change in the credit over the past few weeks. He noted, however, that U.S. automobile demand has been weak and pricing competition has been intense. The company is in the middle of a turnaround and has been doing better, Sprinzen said, but warned that it is still a question of the extent to which this will continue. "We will continue to look at market share and pricing," he added.
Five-Year Mid-Market Protection On DaimlerChrysler