BAC Jumps Past $8 for the First Time in Months

[Stocks-to-Watch]

For the first time since September 1, Bank of America (BAC) shares rose above $8 this morning.

The market’s confidence is likely tied to Bank of America’s improving credit position. The spreads on the bank’s credit default swaps — insurance for bondholders against default — have narrowed considerably since the company’s earnings report on January 19. In the earnings report, BAC said that it expects to post significant improvements in its capital ratios by the end of the year, giving investors confidence that the bank won’t have to tap the equity markets.

CDS spreads for the bank narrowed to 235 basis points this morning; by comparison, spreads were above 400 basis points for most December. The swaps have mostly traded below 300 basis points since the earnings report. That confidence in the bank’s credit quality has buoyed the stock on down days, and given it an extra boost on the market’s strong days this year.

BAC was recently up 1.9% at $8. Other financial stocks are mixed today, with Goldman Sachs (GS) down 1.2%.



Original Article Source by Barrons.com