European credit markets opened in subdued fashion early on Monday, with little corporate news to drive trading, but market participants were keeping an eye on a heavy macroeconomic calendar and the performance of the ailing dollar.
The iTraxx credit indexes held steady in early trading as the dollar recovered some of last week's lost ground after French Finance Minister Thierry Breton called for vigilance over the US currency's recent weakness.
The main iTraxx Europe index, made up of default swaps on 125 key investment-grade companies, held steady at 24.625 basis points, with the mostly "junk"-rated iTraxx Crossover at 239.5 basis points, an index trader in London said.
"It's like a mortuary out there," said a second trader. "But I think there are a few shocks still to come this year." Credit strategists at Lehman Brothers said a weak dollar in and of itself probably had little credit impact for Europe.
"But as Friday showed, it could drive European equities down and volatility up. If so, spreads can continue to drift wider near-term," they said in a note to clients.
The welter of US economic data looming later this week could also rattle the market, the first trader added.
"We're thinking that there's going to be a lot of movement later in the week, as the data starts coming out," he said. Statistics include US housing, consumer confidence, personal income and spending data, and the Institute for Supply Management (ISM) manufacturing index.
The cost of insuring debt from British bookmaker Ladbrokes against default rose, after a market report in Saturday's Independent newspaper said "dealers reckon Ladbrokes is being stalked by a private equity house".
Five-year credit default swaps on Ladbrokes rose 4 basis points to a 129.5 basis point mid-price, the index trader said, meaning it costs 129,500 euros a year to insure 10 million euros of Ladbrokes's debt against default.
German chemicals group Bayer's hybrid bond was unchanged at 263 basis points over Bunds after Bayer posted forecast-beating third-quarter profits on Monday.
In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 3.682 percent, unchanged on the day. The 10-year Bund yielded 3.716 percent, 2.3 basis points more. The 10-year euro swap rate was 3.929 percent.
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