The recent surge of issuance in the European corporate bond market slowed on Monday as new disclosure standards that had helped fuel bond sales were set to come into effect. Supply of corporate bonds is expected to hit 15 billion euros this month as investors rush to miss the June 30 deadline which heralds a tougher document regime under EU legislation.
But with most of those sales already done, just one new issuer announced a deal on Monday, as British American Tobacco planned a seven-year benchmark.
"There's time for a couple more deals before the deadline," said one banker in London. " After that it could go very quiet."
While seller interest waned, however, investors remained enthusiastic, bidding down the expected price on Australian telecom Telstra's planned five- and 10-year bonds by three basis points apiece.
Elsewhere, Danish Oil and Natural Gas (DONG) refined talk on a two-part senior and subordinated bond, with the senior part seen tighter, while the innovative subordinated piece was in the middle of previous expectations.
Investors have given corporate subordinated bonds a mixed reception in recent weeks, as interest in the higher yields offered on the securities was offset by concern that companies may not redeem the bonds, which have a perpetual maturity with a callable feature.
In the secondary market trading was thin on Monday, as sparse news flow and recent spread tightening combined to dampen investor enthusiasm for trading.
Among market bell-weathers, bonds of General Motors were bid slightly wider, traders said, suggesting there was little demand for paper at current levels.
The cost of five-year credit protection on the troubled US automaker was bid at 480 basis points, traders said, around 25 basis points wider. That price means it costs $480,000 to annually insure $10 million against default.
"We are waiting for a new market driver," said a trader in London. "Not much has happened in the past two weeks."
The iTraxx crossover index of credits rated both investment grade and high yield was bid around two basis points tighter at 291 basis points, according to the International Index Company.
Some additional volatility was generated by the quarterly roll in credit default swap contracts on Monday, traders said. All new European contracts agreed in the next three months will expire on September 20.
The slightly longer-maturity helps push out spreads, analysts say, as does higher demand for the new contracts. The roll put around 7 basis points on GM protection, the trader said.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 40.7 basis points more than similarly-dated government bonds at 1547 GMT, 0.2 basis points less on the day.
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