"We believe the current rally is likely to prove transient," analysts in European credit research at London-based Barclays Capital say in a January 9 report. As economic conditions deteriorate, credit spreads will widen, they predict. "In our view, the slowdown in economic activity, coupled with the constriction in credit availability, will lead to dramatic fundamental credit deterioration," the Barclays Capital analysts say. "In fact, we believe that the magnitude of the impending fall in credit quality could test worst-case historical precedents." The number of credit downgrades in Europe is already at 2002 recession levels, the analysts say. And the recession of 2002 was a mild recession, whereas the current downgrade cycle has hardly even begun, they note. Spreads on credit default swap (CDS) indexes will test, and likely exceed by a substantial margin, the widest levels they reached in November 2008, according to Barclays Capital.