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TEXT-S&P on forest products, building materials sector spreads
July 16, 2012 / 7:19 PM / 5 years ago

TEXT-S&P on forest products, building materials sector spreads

July 16 - The forest products and building materials sector
speculative-grade spread is trending wider on average than most nonfinancial
sector speculative-grade spreads, said an article published today by Standard &
Poor's Global Fixed Income Research, titled "The Forest Products And Building
Materials Sector's Wide Speculative-Grade Spread Reflects High Bond Premiums In
Building Materials And Products." 

"The sector's 30-day moving average is 780 basis points (bps), whereas the 
speculative-grade composite spread 30-day moving average is 691 bps," said 
Diane Vazza, head of Standard & Poor's Global Fixed Income Research. The 
forest products and building materials speculative-grade spread is a composite 
of the building materials and products subsector (67% of the total), which has 
a speculative-grade spread of 674 bps, and the paper and forest products 
subsector (33%), which has a speculative-grade spread of 564 bps. 

"The depressed housing market supports the wide spreads," said Ms. Vazza. The 
S&P/Case-Shiller Home Price Indices prices fell by 1.9% for the year ended 
April 30, and the Conference Board Consumer Confidence Index fell by 2.4 units 
to 62 units in June. In our most recent potential bond downgrades report, we 
noted that the forest products and building materials sector has a high 
current negative bias of 22% (see "Credit Trends: Bond Downgrade Potential In 
Emerging And Developed Markets, Including The U.S. And Europe: The Count 
Continues To Increase," published July 9, 2012, on RatingsDirect on the Global 
Credit Portal). Negative bias is the proportion of issuers with negative 
rating outlooks or ratings on CreditWatch with negative implications. Eleven 
U.S.-based forest products and building materials issuers are on the potential 
bond downgrades list.

Over the past week, the Credit Default Swap North America High Yield Index 
spread widened by 17 bps to 597 bps and is tighter than at the start of the 
year when it was 662 bps. Meanwhile, the Credit Default Swap North America 
Investment Grade Index spread widened by 5 bps to 144 bps and is wider than at 
the start of the year when it was 138 bps. Speculative-grade issuance 
increased to $2.2 billion from $0.03 billion over the past week, with the 
spread remaining flat at 679 bps. The speculative-grade spread is tighter than 
its one-year moving average of 684 bps and tighter than its five-year moving 
average of 741 bps. Investment-grade issuance increased to $13.8 billion from 
$0.04 billion, with the spread tightening by 1 bp to 219 bps. The 
investment-grade spread remains wider than its one-year moving average of 211 
bps and tighter than its five-year moving average of 244 bps.
 

The report is available to subscribers of RatingsDirect on the Global Credit 
Portal at www.globalcreditportal.com. If you are not a RatingsDirect 
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 
or sending an e-mail to research_request@standardandpoors.com. Ratings 
information can also be found on Standard & Poor's public Web site by using 
the Ratings search box located in the left column at www.standardandpoors.com. 
Members of the media may request a copy of this report by contacting the media 
representative provided.

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