Fitch Solutions: Sears CDS Climb 39%, Now Lag JC Penney

Credit default swaps (CDS) on Sears Roebuck Acceptance Corporation (Sears) have widened 39% over the past month, according to Fitch Solutions.

Sears CDS significantly underperformed the 9% CDS tightening for the broader North America Retail CDS Index over the same time period. Additionally, the cost of Sears credit protection has climbed to levels not seen in nearly two years. 'Worsening sentiment for Sears is likely attributed to disappointing holiday sales and a lowered forecast for the fourth quarter,' said Director Diana Allmendinger.

Meanwhile, CDS liquidity for Sears is now trading in the second global percentile. 'After pricing consistently tight relative to JC Penney during the latter half of last year, CDS on Sears are now trading 90 basis points wider than credit protection for JCP,' said 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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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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Fitch Solutions
Diana Allmendinger
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