Fitch Solutions: Goldman, Morgan & BofA's CDS Signal Rising Concerns

NEW YORK--()--Credit default swap (CDS) spread movement and liquidity for Goldman Sachs, Morgan Stanley and Bank of America is showing elevated pricing risk, according to Fitch Solutions in its latest earnings commentary.

CDS on Goldman (reporting today) have tightened 8% over the past quarter, lagging the 12% tightening seen for the large US banks overall. 'The CDS market continues to price Goldman Sachs' credit risk at below investment grade levels,' said Author and Director Diana Allmendinger.

Also underperforming is Morgan Stanley (reporting Thursday). Spreads edged out 1% over the quarter, while credit protection is pricing at 'BB-' levels, signaling much market concern for the bank. Spreads on Bank of America Corporation (also reporting Thursday) have fared better over the last quarter, firming 21%. However, spreads are still at stressed levels.

CDS liquidity for all three banks remains very high, trading in the first and second regional percentile. 'The direction of future pricing for Morgan, Goldman and BofA appears to be a lingering question mark for the CDS market,' said Allemdinger.

American Electric Power Inc. (UTILITIES/Electricity)

Credit spreads have tightened over the last three months, with the five-year point tightening from 79 basis points (bps) to 66 bps, a decrease of -16%. The liquidity score on American Electric Power Inc. decreased from 7.41 to 6.93 over the three-month period, causing an increase in liquidity from trading in the 19th percentile to the 18th percentile.

Advanced Micro Devices, Inc. (TECHNOLOGY/Technology Hardware & Equipment)

Credit spreads have tightened over the last three months, with the five-year point tightening from 581 bps to 419 bps, a decrease of -28%. The liquidity score on Advanced Micro Devices, Inc. decreased from 7.59 to 7 over the three-month period, causing an increase in liquidity from trading in the 24th percentile to the 20th percentile.

American Express Company (FINANCIALS/General Financial)

Credit spreads have tightened over the last three months, with the five-year point tightening from 99 bps to 79 bps, a decrease of -21%. The liquidity score on American Express Company decreased from 7.12 to 6.9 over the three-month period, causing a decrease in liquidity from trading in the 11th percentile to the 17th percentile.

Chubb Corporation (FINANCIALS/Nonlife Insurance)

Credit spreads have widened over the last three months, with the five-year point widening from 61 bps to 63 bps, an increase of 4%. The liquidity score on Chubb Corporation decreased from 6.89 to 6.64 over the three-month period, causing a decrease in liquidity from trading in the sixth percentile to the 10th percentile.

Capital One Financial Corporation (FINANCIALS/General Financial)

Credit spreads have tightened over the last three months, with the five-year point tightening from 122 bps to 117 bps, a decrease of -4%. The liquidity score on Capital One Financial Corporation decreased from 6.94 to 6.72 over the three-month period, causing a decrease in liquidity from trading in the seventh percentile to the 12th percentile.

CSX Corporation (INDUSTRIALS/Industrial Transportation)

Credit spreads have tightened over the last three months, with the five-year point tightening from 56 bps to 53 bps, a decrease of -5%. The liquidity score on CSX Corporation decreased from 7.6 to 6.74 over the three-month period, causing an increase in liquidity from trading in the 25th percentile to the 12th percentile.

E I Dupont de Nemours (BASIC MATERIALS/Chemicals)

Credit spreads have tightened over the last three months, with the five-year point tightening from 68 bps to 47 bps, a decrease of -30%. The liquidity score on E I Dupont de Nemours decreased from 7.27 to 6.9 over the three-month period, causing a decrease in liquidity from trading in the 15th percentile to the 17th percentile.

Quest Diagnostics Incorporated (HEALTH CARE/Health Care Equipment & Services)

Credit spreads have tightened over the last three months, with the five-year point tightening from 88 bps to 70 bps, a decrease of -20%. The liquidity score on Quest Diagnostics Incorporated decreased from 7.74 to 6.94 over the three-month period, causing an increase in liquidity from trading in the 29th percentile to the 18th percentile.

Freeport-McMoRan Copper & Gold Inc. (BASIC MATERIALS/Industrial Metals)

Credit spreads have widened over the last three months, with the five-year point widening from 180 bps to 183 bps, an increase of 2%. The liquidity score on Freeport-McMoRan Copper & Gold Inc. decreased from 6.94 to 6.69 over the three-month period, causing a decrease in liquidity from trading in the 7th percentile to the 11th percentile.

GATX Corporation (INDUSTRIALS/Support Services)

Credit spreads have tightened over the last three months, with the five-year point tightening from 210 bps to 190 bps, a decrease of -10%. The liquidity score on GATX Corporation decreased from 7.55 to 6.92 over the three-month period, causing an increase in liquidity from trading in the 23rd percentile to the 17th percentile.

Goldman Sachs Group Inc. (FINANCIALS/General Financial)

Credit spreads have tightened over the last three months, with the five-year point tightening from 293 bps to 270 bps, a decrease of -8%. The liquidity score on Goldman Sachs Group Inc. decreased from 6.62 to 5.79 over the three-month period, causing an increase in liquidity from trading in the second percentile to the first percentile.

Halliburton Company (OIL & GAS/Oil Equipment Services & Distribution)

Credit spreads have tightened over the last three months, with the five-year point tightening from 105 bps to 70 bps, a decrease of -33%. The liquidity score on Halliburton Company decreased from 7.25 to 6.56 over the three-month period, causing an increase in liquidity from trading in the 13th percentile to the eighth percentile.

Honeywell International Inc. (INDUSTRIALS/General Industrials)

Credit spreads have tightened over the last three months, with the five-year point tightening from 42 bps to 30 bps, a decrease of -28%. The liquidity score on Honeywell International Inc. decreased from 7.37 to 6.89 over the three-month period, causing an increase in liquidity from trading in the 18th percentile to the 16th percentile.

International Business Machines Corporation (TECHNOLOGY/Software & Computer Services)

Credit spreads have tightened over the last three months, with the five-year point tightening from 44 bps to 28 bps, a decrease of -37%. The liquidity score on International Business Machines Corporation decreased from 7.75 to 7.23 over the three-month period, causing an increase in liquidity from trading in the 30th percentile to the 27th percentile.

Johnson & Johnson (HEALTH CARE/Pharmaceuticals & Biotechnology)

Credit spreads have tightened over the last three months, with the five-year point tightening from 41 bps to 40 bps, a decrease of -2%. The liquidity score on Johnson & Johnson decreased from 8.51 to 7.89 over the three-month period, causing an increase in liquidity from trading in the 51st percentile to the 42nd percentile.

Kinder Morgan Energy Partners L.P. (OIL & GAS/Oil Equipment Services & Distribution)

Credit spreads have tightened over the last three months, with the five-year point tightening from 201 bps to 178 bps, a decrease of -12%. The liquidity score on Kinder Morgan Energy Partners L.P. decreased from 6.72 to 6.39 over the three-month period, causing a decrease in liquidity from trading in the third percentile to the fifth percentile.

Coca-Cola Company (The) (CONSUMER GOODS/Beverages)

Credit spreads have widened over the last three months, with the five-year point widening from 47 bps to 52 bps, an increase of 11%. The liquidity score on Coca-Cola Company (The) decreased from 8.14 to 7.58 over the three-month period, causing an increase in liquidity from trading in the 39th percentile to the 35th percentile.

Marriott International, Inc. (CONSUMER SERVICES/Travel & Leisure)

Credit spreads have tightened over the last three months, with the five-year point tightening from 121 bps to 90 bps, a decrease of -26%. The liquidity score on Marriott International, Inc. decreased from 7.16 to 6.76 over the three-month period, causing a decrease in liquidity from trading in the 12th percentile to the 13th percentile.

New York Times Company (The) (CONSUMER SERVICES/Media)

Credit spreads have widened over the last three months, with the five-year point widening from 282 bps to 296 bps, an increase of 5%. The liquidity score on New York Times Company (The) increased from 7.03 to 7.05 over the three-month period, causing a decrease in liquidity from trading in the ninth percentile to the 22nd percentile.

Sherwin-Williams Company (The) (INDUSTRIALS/Construction & Materials)

Credit spreads have widened over the last three months, with the five-year point widening from 59 bps to 67 bps, an increase of 15%. The liquidity score on Sherwin-Williams Company (The) decreased from 7.33 to 6.95 over the three-month period, causing a decrease in liquidity from trading in the 17th percentile to the 18th percentile.

Verizon Communications, Inc. (TELECOMMUNICATIONS/Fixed Line Telecommunications)

Credit spreads have tightened over the last three months, with the five-year point tightening from 66 bps to 63 bps, a decrease of -5%. The liquidity score on Verizon Communications, Inc. decreased from 7.37 to 6.71 over the three-month period, causing an increase in liquidity from trading in the 18th percentile to the 11th percentile.

Yum! Brands Inc. (CONSUMER SERVICES/Travel & Leisure)

Credit spreads have tightened over the last three months, with the five-year point tightening from 79 bps to 65 bps, a decrease of -18%. The liquidity score on Yum! Brands Inc. decreased from 7.39 to 6.98 over the three-month period, causing a decrease in liquidity from trading in the 19th percentile to the 20th percentile.

Bank of America Corporation (FINANCIALS/Banks)

Credit spreads have tightened over the last three months, with the five-year point tightening from 342 bps to 270 bps, a decrease of -21%. The liquidity score on Bank of America Corporation decreased from 6.48 to 6.09 over the three-month period. The regional percentile ranking stayed the same

Morgan Stanley (FINANCIALS/Nonequity Investment Instruments)

Credit spreads have widened over the last three months, with the five-year point widening from 369 bps to 374 bps, an increase of 1%. The liquidity score on Morgan Stanley decreased from 6.37 to 5.43 over the three-month period. The regional percentile ranking stayed the same

SLM Corporation (a.k.a Sallie Mae) (FINANCIALS/General Financial)

Credit spreads have tightened over the last three months, with the five-year point tightening from 616 bps to 463 bps, a decrease of -25%. The liquidity score on SLM Corporation (a.k.a Sallie Mae) decreased from 6.03 to 5.69 over the three-month period. The regional percentile ranking stayed the same

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Fitch Solutions, a division of the Fitch Group, focuses on the development of fixed-income products and services, bringing to market a wide range of data, analytical tools and related services. The division is also the distribution channel for Fitch Ratings content.

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Contacts

Fitch Solutions
Diana Allmendinger, +1-212-908-0848
Director
Fitch Solutions, 33 Whitehall Street, New York, NY 10004
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Solutions
Diana Allmendinger, +1-212-908-0848
Director
Fitch Solutions, 33 Whitehall Street, New York, NY 10004
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com