Bonds: sales dominate as spreads edge wider

Bond sales were again the main event in the European corporate bond markets on Thursday, as investors set aside trading to focus on the expected 16 billion euros of new debt being sold this month. Secondary market spreads edged wider for a second day, suggesting the heaviest expected monthly supply in almost a year and a half was beginning to weigh on sentiment.
"The focus is firmly on the primary market," said a trader in London. "Most of the trading we are seeing is on the indexes, which are slightly weaker."
The iTraxx Europe index of most active credit default swaps was 0.3 basis point higher, according to the International Index Company, bid at a reading of 39.2.
Foremost among issuers was Telecom Italia, which priced its 500 million pound 10-year bond at 115 basis points over gilts. The bond traded bid a basis point tighter at 114 bps over government securities later in the day.
Australia's Westfield Group, the world's top shopping mall owner by market value, sold sterling- and euro-denominated bonds worth $1.813 billion, said the banks managing the deal.
The company sold a 600 million pound ($1.09 billion) 5 percent 12-year bond at 110 bps over Gilts, in line with expectations, and a 600 million euro 3.625 percent ($723 million) 7-year bond at 60 bps over mid-swaps.
Elsewhere, Frauenthal Holding AG, an Austrian supplier of truck components, plans to sell a 70 million euro 7-year bond at swaps plus 80-85 bps in its debut offering, said a source with knowledge of the deal.
In the high-yield market, Spanish gaming company Codere sold a 335 million euro high-yield bond, pricing the deal at the tight end of guidance, a banker familiar with the deal said.
Codere priced its 10-year bond at par to give a yield of 8.25 percent, or a spread of 496 bps over the 2015 Bund.
In the secondary market there was little outstanding, traders said, with most bonds trading slightly weaker.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 41.2 bps more than similarly-dated government bonds at 1450 GMT, 0.2 basis point more on the day.
French telecoms equipment maker Alcatel bucked the weakening trend amid rising hopes it will win part of a multi-billion euro contract to build the European Union's Galileo navigation system.
Five-year credit default swaps on the company traded 10 bps tighter at 105 basis points. That means it costs 105,000 euros to insure against default 10 million euros of Alcatel debt.