European auto bonds gain

Autos were in focus in the European corporate bond market on Wednesday, as DaimlerChrysler took advantage of strong results to announce plans for a new bond, while Fiat rallied following better-than-expected numbers.
Across the Atlantic, Ford Motor Co's finance arm also moved into the primary market with plans to sell $1 billion of bonds, with its euro bonds dipping slightly as the session wore on.
US automakers generally underperformed their European peers, traders said.
"Ford protection is about 15 basis points wider - which doesn't really make a lot of sense but people are feeling defensive and taking some chips off the table. European autos are a bit better after Daimler's numbers were improved," said one trader in London.
Five-year credit default swaps on Ford traded at 400 basis points in late trading, the trader said.
DaimlerChrysler, however, was able to tighten the spread on a 1.0 billion euro bond it plans to sell, a banker familiar with the sale said, a day after it reported surprisingly strong quarterly results.
The bond, which matures in 5 years and 1 day, is set to yield 57 to 58 basis points over swaps, versus earlier guidance of around 60 basis points over, while the size has been increased from 750 million euros, the banker said.
BNP Paribas, Commerzbank and Royal Bank of Scotland are managing the sale.
Fiat also gained after it reported a narrower third-quarter loss for its core auto unit, beating expectations. Five-year default swaps rallied 10 basis points to be bid at 365 basis points, traders said.
And Volkswagen also benefited, with default swaps tightening one basis point to be bid at 43 basis points, another trader said.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 38.1 basis points more than similarly dated government bonds at 1512 GMT, 0.2 basis points more on the day.
Elsewhere, default swaps on Danish telecom TDC widened again after the Wall Street Journal Europe said a second group of private equity firms had increased the amount they were willing to bid and had gained access to the firm's books.
Five-year default swaps on TDC moved five basis points wider to be bid at 275 basis points, a telecoms trader said.
"We widened on the back of the news, but you've still got the possibility of Swisscom coming in," he said.
"It's a binary situation: spreads could trade at 450 (basis points) or they could trade at 50, and we're sitting somewhere in the middle."
The wider market was quiet, although external forces, particularly weakness in government bonds, weighed on sentiment.
"Credit markets remain torn between a more negative external environment and individual events suggesting credit quality deterioration at the margin on the one hand and solid technicals, principally a lack of supply, on the other," analysts at BNP Paribas said in a note.
They said the rise in government bond yields meant that there was now an alternative to company credit for those investors interested in carry trades.
The telecoms trader noted long-dated bonds were still performing relatively poorly compared with shorter-dated bonds, partly as a result of the weakness in government bonds, but also as a result of a shifting consensus on value in the bond markets.
"It may be a sign of some people trying to get out while the going's good. Credit quality at telecoms remains very good, but most people believe we have reached the best, the least-leveraged the European TMTs are going to be," he said.
Telecom Italia's 5.25 percent bond due 2055, for instance, the longest-dated outstanding euro corporate bond, has widened some 27 basis points over the past month to stand bid at 177 basis points over Bunds.