Corporate bonds eke out gains, Daimler in focus

European corporate bonds eked out gains on Wednesday, as investors focused on Germany's DaimlerChrysler 2003 profits, while France Telecom results fuelled concern over fixed line business.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 65.4 basis points more than similarly dated government bonds at 1547 GMT, 1.6 basis points lower on the day.
"The Daimler results were alright but not that great," said one trader. "We saw the company's default swaps widen out a couple of basis points after the results then tighten back to little changed."
DaimlerChrysler, the world's fifth biggest carmaker, posted 2003 operating profit excluding one-offs of 5.1 billion euros or $6.3 billion, beating its five billion euro target.
A Reuters poll of 20 analysts showed an average estimate of 5.89 billion euros for operating profit, but that included a 1.2 billion euro gain from a disposal and charges for restructuring at Chrysler.
Daimler five-year credit default swaps moved two basis points wider to 104 basis points following the results, before tightening back to 102 basis points, the trader said. That means it costs 102,000 euros to insure 10 million euros of Daimler debt.
Elsewhere in autos, Ford's 5.75 percent bond due in 2009 tightened in early trade but ran out of steam and was little changed at 178 basis points over government bonds at 1511 GMT, a trader said.
"It's a very, very heavy market," another trader said. "Don't let anybody tell you things are turning round - they are not."
State-controlled France Telecom posted a 40 percent rise in 2003 operating profit on Wednesday but saw its shares drop amid concern over profit growth in its fixed line business.
The French telecoms giant, one of Europe's most indebted companies, said operating profit was 9.5 billion euros ($11.85 billion) compared with 6.8 billion in 2002.
France Telecom five-year credit default swaps fell by one or two basis points to 71 basis points, a trader said. Another trader earlier said the cost of protection had dropped to around 67 basis points.