NEW YORK--(BUSINESS WIRE)--The continued freefall of oil prices is producing a ripple effect into the industrial sector and, subsequently, the credit default swap (CDS) spreads of Caterpillar Inc. according to Fitch Solutions in its latest CDS Case Study Snapshot.
Five-year CDS on Caterpillar have widened 52% over the past month and are at the widest levels seen in over a year. This is in stark contrast to Fitch Solutions' broader North American Industrials CDS Index, which remained largely unchanged over the same time period. CDS credit protection on Caterpillar's debt is now pricing in-line with 'BBB+' levels.
'Growing market concerns for Caterpillar are likely stemming from continued weak demand for mining equipment, driven by a drop in commodity prices as well as the potential impact of lower oil prices on demand for equipment in the oil and gas sector,' said Director Diana Allmendinger.
Fitch Solutions case studies build on data from its CDS Pricing Service and proprietary quantitative models, including CDS Implied Ratings. These credit risk indicators are designed to provide real-time, market-based views of creditworthiness. As such, they can and often do reflect more short term market views on factors such as currencies, seasonal market effects and short-term technical influences. This is in contrast to Fitch Ratings' Issuer Default Ratings (IDRs), which are based on forward-looking fundamental credit analysis over an extended period of time.
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