European corporate bonds narrowed down

Volumes in Europe's corporate bond markets narrowed down to a trickle on Thursday with most investors starting the weekend early, but the potential pricing of two new issues could spice things up on Friday.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 56.1 basis points more than similarly dated government bonds at 1523 GMT, 0.1 basis point less on the day.
"It's been pretty much closed since lunch time, prices are flat and it's likely to stay like that until Monday," said a bond trader in London. "I think the market is too expensive and if anything we should try and push wider next week. But unless we get some momentum back it may not happen."
Trading was brought nearly to a halt by a public holiday in Germany on Thursday, and US markets are shut on Friday for the state funeral of former President Ronald Reagan.
France Telecom's bonds 8.125 percent bond due in January 2033 was around a basis point wider on the day at 125 basis points over Bunds by 1435 GMT, with no surprises out of a presentation the company held for investors.
Elsewhere, credit protection for UK security to pest control firm Rentokil Initial Plc moved higher on renewed speculation the company may be target of a leveraged buy-out or be broken up, but soon moved back in to trade flat at around 105 basis points.
This means it costs 105,000 euros annually to insure 10 million euros of Rentokil debt against default, compared with around 60 basis points nearly three weeks ago.
The company's credit default swaps have risen since May 19 when Rentokil warned pre-tax profit would be below forecasts because of deteriorating business conditions.
Elsewhere, Nordic forestry group Stora Enso set spreads for a bond exchange offer in which it will buy back 2007 notes for bonds maturing in 2014.
The Finnish-Swedish papermaker said it would buy back its 6.375 percent notes due June 2007 at 26 basis points over German Bunds, compared with previous price guidance of a spread of 22 to 27 basis points over the German Bund maturing on 4 July, 2007.
Stora Enso said it would set the spread for the new bonds, maturing in June 2014, at 74 basis points over 10-year mid-swaps. The initial price guidance was between 68 and 78 basis points over mid-swaps.