Positive sentiment returned to the credit markets on Wednesday as stable equities helped reinvigorate appetite for corporate bonds. "We always suspected that if equities stabilised, credit would rally," said Marcus Schueler, head of credit product marketing at Deutsche Bank.
"People have been looking to buy on dips as nothing has changed from a fundamental perspective - default rates are low and demand is still there." The iTraxx Crossover index, a benchmark for the riskier high-yield market, traded 13 basis points tighter at 15:15 GMT at 217 basis points. That's 30 basis points tighter than its wide trade on Monday, and about 50 basis points wider than the record tight level before the recent volatility began.
European stocks edged higher on Wednesday, though underperformed the recovery in credit. At 1530 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent.
Among single names, the cost of insuring the debt of Carrefour against a default rose in early trade after Group Arnault and Colony Capital said they bought 64 million shares in the French supermarket group and now own 9.8 percent.
Five-year credit default swaps on Carrefour widened 5 basis points to a 32 basis point mid-price, a trader said, before retracing to close little changed. The cost of default protection on betting giant Ladbrokes fell after football pools operator Sportech said it is in talks to buy the Vernons Pools business.
Five-year credit default swaps on Ladbrokes traded 7 basis points tighter at 134.5 basis points, said a dealer in London. Sportech already owns a rival version of the pools - a British system of betting on football matches.
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