European corporate bonds stem gains

Gains in European corporate bonds slowed after a recent rally as risk appetite declined amid concern that rising energy costs may crimp corporate profitability in the coming months.
The iTraxx index of credits rated both investment and non-investment grade closed out the day bid at 294 basis points, compared with 296 basis points on Wednesday. The index has tightened from 312 basis points a week ago amid relief over the effects of Hurricane Rita in the oil-producing southern US
Still, oil strode towards $67 a barrel on Thursday, stoked by fears that US refineries would be unable to churn out ample heating fuel to warm American consumers this winter.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average of 36.8 basis points more than similarly dated government bonds, 0.2 basis points less on the day.
General Motors' 8.375 percent euro bond due in July 2033 traded half a point lower, a trader said, bid at 78.75 percent of face value.
European telecoms bonds put in a relatively good showing, with spreads around a basis point tighter across the sector by 1430 GMT, a trader in London said, although activity was light.
"It's been strong most of the day. We're just fading a little now with US equities dipping a bit," he said.
Telecom Italia's 5.25 percent euro bond due 2055, the longest-dated euro corporate bond outstanding, was bid at 155 basis points over government bonds, he said.
Elsewhere, five-year credit default swaps on Carlton Communications fell dramatically as investors learned from ITV's bankers on a non-deal roadshow that the Carlton name may cease to exist after its existing bonds mature.
Five-year protection Carlton fell 24 basis points to 71 basis points, the trader said, following the news. Carlton's last outstanding bond expires in 2009.
Austrian motorway operator Autobahnen- und Schnellstrassen-Finanzierungs AG, or Asfinag, sold a 1.2 billion euro ($1.45 billion) 10-year bond on Thursday, one of the banks managing the sale said.
The bond, due October 6, 2015, was sold at 99.014 percent of face value and pays a coupon of 3.125 percent, to yield 2 basis points less than mid-swaps.
The triple-A issuer is guaranteed by the Republic of Austria. Lead managers were CSFB, Deutsche Bank and J.P. Morgan.
Greek mobile operator TIM Hellas has dropped plans to issue dollar-denominated notes and will sell all of its 1.28 billion euro two-part high-yield bond in euros, banking sources said on Thursday.
The sale comprises a 925 million euro seven-year floating-rate note that is set to yield 350 basis points over Libor and a 355 million euro eight-year fixed-rate note that is set to yield 8.75 percent, a market source said earlier this week. Pricing is due on Friday.