European corporate bonds edged higher on Wednesday, led by telecommunications firms, as investors shrugged off record oil prices, while rising stock markets boosted confidence.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 50.3 basis points more than similarly dated government bonds at 1450 GMT, 0.3 basis points less on the day, and a low for the year.
"US stock futures were way down but indexes have just moved into positive territory - a bit all over the place," said one trader. "Corporate bonds are a touch better - we are seeing greater confidence in economic growth going forward."
US and European stocks reversed early declines, as investors bet that rising oil prices wouldn't stymie the global economic recovery.
General Motors 8.375 percent bond due in June 2033, among the securities most affected by investor sentiment, was trading about one basis point tighter at 283 basis points over Bunds, the trader said.
Oil prices surged to a new high above $47 a barrel on Wednesday on evidence from major economies that energy costs are not substantially slowing the economic growth that fuels oil demand.
In Germany, Chancellor Gerhard Schroeder said that while high prices were a concern, global expansion remained strong.
Deutsche Telekom's shorter-dated bonds were around one basis point tighter, a trader said, after reports that Polish conglomerate Elektrim will sell it a stake in mobile teleco firm PTC.
"The front end (of the broader telco sector) continues to be well bid," said one London trader. "Accounts are looking to shorten duration and the long end is under-performing."
Telekom Austria's bonds tightened, the trader said, after reports that Austria's privatisation agency OeIAG plans to sell a 42 percent stake in the Austrian operator to Swisscom in a long-awaited deal.
A source close to the deal said the cash and share take-over could value Telekom Austria at about 7.5 billion euros. An OeIAG spokeswoman declined to comment and a Swisscom spokeswoman said no final deal had been reached.
Telekom Austria's 5.0 percent bonds due 2013 were three to four basis points tighter at 56 basis points over government debt. Swisscom has no vanilla bonds outstanding.
Swedish telecoms equipment maker Ericsson said it bought back 410 million euros ($502.5 million) of bonds maturing on May 31, 2006, to reduce debt and interest expense.
By 1429 GMT, five-year default swaps on the company were trading at 132.5 basis points, two basis points lower than on Tuesday, and in line with the rest of the market.
The price means it costs 132,500 euros a year to insure 10 million euros of Ericsson debt against default.
"Most of the good news is priced in on Ericsson - I think we may be nearing its tights," said one trader.
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