Europe's main credit default swap indexes rallied on Friday, as a rebound in US and European shares helped them pare some of the week's widening, but traders said the market was quiet ahead of the soccer World Cup.
The iTraxx Crossover index of mainly high-yield names tightened 8 basis points, bid at 266 basis points, a trader said, but was still 16 basis points wider than last Friday's close.
"Equities did okay today, that's why we're tighter," a second trader said. "When there is no significant client flow, everyone just watches the equities."
"The key for our market, clearly, is what happens with equity volatility," Calyon credit strategist Brian Venables said. "If we can get some form of calm in equity markets, and I think where today's close happens will be key for that, then spreads may simply sit there and tread water."
Dealers said volumes were low, with many in the market distracted by the start of the World Cup. Germany kicks off the month-long tournament when they meet Costa Rica at 1600 GMT.
"I am the entire credit team this afternoon," a German credit trader said. "Everyone is already on their way to the stadium to watch the game."
The cost of credit default protection on VNU, the world's largest market researcher, rose, with 5-year credit default swaps 5 basis points higher at 200 basis points, a trader said.
"The market is still digesting yesterday's news," he said. The private equity group set to take over VNU said late on Thursday that more than 97 percent of VNU's share capital had been tendered for its 7.6 billion euro buyout offer.
Valcon, the buyout vehicle that includes Kohlberg Kravis Roberts & Co and the Carlyle Group, said in a joint statement with VNU that it will apply for a delisting of its shares.
With a stake of more than 95 percent, the consortium of six private equity firms will have the right to use a squeeze-out procedure to force remaining shareholders to sell the group, the companies said in a statement. Remaining shareholders could still sell their shares until later on Friday.
In the primary market, British property group Hammerson sold a 700 million euro 9-year bond, bringing the tally of new corporate euro bonds this week to 3.9 billion euros, following deals from Vodafone, Gasunie, PPR and VW Bank.
Market-watchers have said some issuers have sped up bond sales recently, to conclude deals before the World Cup, although the market will remain open.
Bankers are still working on new deals for tobacco group Swedish Match, Finnish utility Fortum and a sterling bond for the London Stock Exchange.
Calyon's Venables said issuance was likely to slow over the coming weeks.
"With the World Cup, and the weaker market that we have anyway, (corporate borrowers) may wait for some stability - there's no point issuing into these conditions," he said.
Dresdner Kleinwort Wasserstein analysts said US inflation and its implications for the Federal Reserve would be key next week, with PPI data on Tuesday and CPI data on Wednesday,
"The market is obsessed with the Fed, and the Fed is watching data, which may lead to continued market volatility in the coming months," the analysts wrote in a note to clients.
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