NEW YORK--(BUSINESS WIRE)--Discouraging news around its future outlook has driven Caterpillar Inc.'s credit default swap (CDS) spreads to levels not seen in two years, according to Fitch Solutions in its latest CDS Case Study Snapshot.
Five-year CDS on Caterpillar widened out 43% over the past week to price at the widest levels observed since 2013. After pricing consistently in line with 'A/A-' levels over the past year, credit protection for Caterpillar is now pricing in 'BBB' territory.
'Recent CDS spread widening for Caterpillar is likely attributed to the company cutting its forecasts and announcing plans to cut up to 10,000 jobs as it continues to adjust to an extended decline in the mining sector and weak demand for oil and gas equipment,' 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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