The iTraxx credit derivatives indices pushed wider again early on Monday as investment bank dealers looked to balance their books and technical factors drove trading, market participants said.
The iTraxx Crossover index, made up mostly of high-yield credits, widened 5 basis points by 0747 GMT to 268 basis points, while the iTraxx Europe index of 125 investment-grade credit default swaps was 0.5 basis points wider at 32.5 basis points.
"It's a continuation of what started last Wednesday," said one dealer. "We closed at the wides on Friday and it's carrying on this morning.
"Explaining it is as difficult as explaining why we were tighter before," he said.
The index market has been dominated by technical trading in recent days, with little in the way of fundamental news to support the moves that first saw the indices hit record tight levels in the middle of last week, and then rebound sharply.
Another trader said Monday's move was slower than some of the trading seen last week, with less volume.
"It looks like a few people still have a small overhang," and are buying protection in order to close out long positions, the trader said. "It's the right thing to do in terms of trading discipline."
In telecoms, the cost of insuring against a default by Vodafone and Telefonica rose after the Daily Mail said documents circulating in the City of London suggest a consortium including US firm Verizon, Telefonica and private equity firm Blackstone hope to find funding for an offer for Vodafone.
Five-year credit default swaps on Vodafone rose 3 basis points to 36.5 basis points, while default swaps on Telefonica rose 5 basis points to 49 basis points.
That means it costs 49,000 euros a year to insure 10 million euros of Telefonica's debt against default.
Five-year default swaps on Compass, the world's biggest caterer, were unchanged at 56 basis points, another trader said, after it agreed to sell its travel concession unit to groups of investors led by EQT Partners AB and Macquarie Bank for 1.82 billion pounds in cash.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 46.7 basis points more than similarly dated government bonds at 0813 GMT, 0.1 basis points less on the day.
Despite the looming Easter break, two new corporate bond sales were announced early on Monday.
Dutch property group Rodamco Europe plans to issue a 5-year euro bond this week, a banker familiar with the sale said.
ABN Amro and J.P. Morgan are managing the sale, with the proceeds to be used to refinance existing short-term debt and for general corporate purposes.
The bond will feature a change of control clause that allows investors to sell their bonds back to the company at par if it is downgraded to "junk" status due to a take-over. The clause features a 120-day timer to deal with pre-emptive ratings downgrades, the banker said.
And German chemicals group BASF plans to issue a euro benchmark bond, an official at one of the banks managing the sale said.
BNP Paribas, Deutsche Bank and Dresdner Kleinwort Wasserstein are managing the sale. An investor conference call will take place later on Monday, the official said.
In underlying government bond markets the yield on the interest rate sensitive two-year Schatz was 3.265 percent, 3.0 basis points more on the day. The 10-year Bund was yielding 3.881 percent, 3.0 basis points less.
The 10-year euro swap rate was 4.083 percent.
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