European corporate bonds drifted sideways on Monday with investors waiting on the sidelines ahead of the US presidential elections, with Network Rail bonds unchanged after the group mandated banks for sterling bonds.
The UK rail operator plans to issue a series of sterling-denominated benchmark bonds off its new 20-billion- pound ($36.65 billion) equivalent debt issuance programme, said joint lead managers Barclays Capital, Citigroup, Royal Bank of Scotland and UBS.
"I think you may see movement in spreads maybe if people start selling the '09's (4.875 percent sterling bonds maturing in 2009) to buy longer maturities, but at the moment there's no movement in the spreads," said one bond trader in London.
Network Rail said a month ago it would return to the debt markets by the end of the year. It plans to borrow 22 billion pounds over the next five years and spend 26 billion pounds over the same period to improve its 21,000 miles of track.
The new bonds will be launched following UK investor presentations scheduled for next week, the lead managers said.
"We are looking at maturities of 10 years or more," a source close to the deal said.
In the wider market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 50.5 basis points more than similarly dated government bonds at 1602 GMT, 0.1 basis points less on the day.
Volumes were extremely thin ahead of the US presidential elections on Tuesday, with investors were mainly focused on whether a winner could be announced immediately or whether a close result would lead to numerous recounts as in 2000.
"If there's going to be an (election) decision one way or another, that will be a positive thing, but if it's going to be like last time, spreads will widen," one bond trader said.
Volumes were also capped by some markets being closed due to All Saints Day on Monday.
Trading in auto bonds was slowed down further by investors looking forward to US auto sales for October, due to be published on Wednesday, and job numbers due at the end of the week, another trader said.
General Motors' 8.375 percent bond due in July 2033, one of the most liquid euro-denominated securities, was trading about one basis point wider at 312 basis points over Bunds.
The cost of credit protection on Sweden's Scania, Europe's third-largest truckmaker, was little changed, traders said, after the company reported third quarter profits ahead of expectations.
Scania's 5-year credit default swaps were trading at 22.5 basis points, a trader said. That means it costs 22,500 euros annually to insure 10 million euros of Scania debt.
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