European corporate bonds were mixed on Wednesday with auto bonds weaker before key US sales data, while bonds of France Telecom crept higher after the French government said it would cut its stake in the company.
France will sell up to 12.1 percent of France Telecom to cut national debt, the government said. The company also said it would launch a one billion euro convertible bond maturing in January 2009.
"France Telecom has improved slightly along with the rest of the telco sector especially in the five- to 10-year area," said one trader. "But the feeling is weaker than of late. People are taking a new look at valuations, which are incredibly expensive."
France Telecom's credit default swaps were around one basis point lower at 51 basis points. That means it now costs 51,000 euros a year to insure 10 million euros of France Telecom debt against default.
"My instincts are that this is rating neutral," said Raymond Hill, a telecom analyst at Fitch Ratings. "If France Telecom faced a crisis and ratings started to trend down again then the fall in state support may be a factor, but they are nowhere near that now."
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 48.1 basis points more than similarly-dated government bonds at 1435 GMT, 0.8 basis points more on the day.
In the high-yield market bonds of Kabel Deutschland (KDG) dipped briefly after the German cable TV operator offered to triple spending on broadband Internet services and make other concessions to appease antitrust regulators and rescue its cable merger. The firm is bidding for three smaller rivals.
The company's 10.625 percent euro-denominated bond due 2014 slipped around a point on the news before recovering to be bid around 102.5 percent of face value, traders said.
Elsewhere, bondholders of Polish conglomerate Elektrim were set to vote down changes to the bonds' terms, which Elektrim says are needed for the sale of telecoms operator PTC, a bondholder source said on Wednesday.
Deutsche Telekom has 49 percent of east Europe's largest mobile operator, and last year offered Elektrim and Vivendi 1.1 billion euros for the rest.
A committee which owns about half of the bonds will reject the current proposals at a meeting set for September 3, but was working on a compromise proposal, the source said.
Widely-held bonds of US auto makers widened as traders anticipated Wednesday's release of August US domestic light vehicle sales data would show a decline.
CreditSights Inc expects vehicle sales to show a four percent decline to 1.45 million units in August, or a 16.8 million annual rate. Vehicle sales registered an annual rate of 17.2 million for July, off 1 percent from a year earlier.
The research firm also expects dealer inventory levels at the big three auto-makers to finish at about 2.6 million units in August, among the highest levels on record.
General Motors' 8.375 percent bond due July 2033 was at 288 basis points over Bunds, around two basis points wider on the day, having widened around five basis points on Tuesday.
Ford's benchmark 5.75 percent bond due 2009 was about a basis point wider at 123 basis points over Bunds.
Japanese carmaker Toyota plans on Wednesday to sell 200 million pounds of a December 2009 bond at 35 basis points over gilts, said a source close to the deal.
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