European corporate bonds fell on Wednesday, tracking losses in stock markets, and France's Schneider Electric was close to selling two bonds worth a total of 1.0 billion euros ($1.28 billion).
Automobiles and telecommunications, Europe's two most liquid bond sectors, both showed weakness. Stocks slid after North Korea test-fired a barrage of missiles.
"The long-end telcos are weak. There are no headlines causing this, we are just tracking equities and retracing the rally from recent days," said a telecoms trader in London.
Telecom Italia's 5.25 percent euro bond due January 2055, the longest-dated euro corporate bond outstanding, was bid at 213 basis points more than government debt, or four basis points wider on the day.
General Motors' 8.375 percent euro bond due in July 2033 fell after the Detroit car giant's shares opened lower. At 1422 GMT, the bond was bid 0.25 point lower on the day at 80.25 percent of face value. But cash bond spreads did not all widen on the day. The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 54 basis points more than similarly dated government bonds at 1507 GMT, 0.1 basis point less on the day.
In the credit default swaps market, the debt protection cost of GUS Pls rose after the British retail and information group said it had received a number of expressions of interest in Argos Retail Group and Experian in recent months.
A CDS trader said the five-year CDS on GUS was bid eight basis points wider on the day at 51 basis points.
But GUS said it will not be acting on the solicitations.
"It has concluded that shareholder interests are better served by proceeding with the previously announced demerger of Argos Retail Group and Experian," GUS said in a statement.
In the primary market, Schneider Electric, the French specialist in power and process controls equipment, will sell a 5-year floating rate note (FRN) and a 7-1/2-year bond both of 500 million euros later on Wednesday, an official at one of the lead managers said.
Schneider's FRN will be priced to yield 24 basis points over 3-month Euribor, at the high end of earlier guidance for a spread of 22 to 24 basis points.
The bond will yield 34 basis points over mid-swaps, also at the high end of earlier guidance for a spread of "low 30s" basis points.
ABN Amro, Calyon and Societe Generale are the lead managers. Also in the pipeline, Britain's Avis Europe Plc, Europe's biggest car rental company, said on Wednesday it was planning a senior floating rate note issue.
An official at one of the banks managing the high-yield note issue said it would total 200 million euros ($256.2 million). The note will carry a 7-year maturity and be callable after two years, he said. Road shows start early next week, with pricing due by the end of the week, the official said. Barclays Capital, Royal Bank of Scotland, Dresdner Kleinwort and SG CIB are managing the deal, with Barclays and RBS as physical bookrunners.
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