European corporate bonds traded higher on Thursday, holding firm their advance from the morning session and continuing to track gains in US stocks.
"The market is firm because there has been a decent US equities market coming in," said a bond trader in London.
US stocks rose after retailers announced increased sales in October and a government report on US productivity data eased concerns about rising inflation and interest rates.
The Dow Jones industrial average as up almost 70 points at 1610 GMT.
US autos retained their gains on the day, a trader in London said, with five-year default swaps on GMAC, the financing arm of General Motors Corp, at 250 basis points by 1510 GMT, 20 basis points less on the day.
The spread on France Telecom's 8.125 percent bond due in January 2033, one of the most liquid in the sector, was three basis points tighter on the day at 105 basis points over government bonds. And Telecom Italia's 5.25 percent euro bond due January 2055, the longest-dated euro corporate bond outstanding, was bid four basis points tighter on the day at 178 basis points more than government debt.
The high-yield market also saw strong performance, another trader in London said.
One example was UK plastic pipe systems supplier Polypipe, whose bonds were trading above par on Thursday having initially struggled after launch in late October, the trader said.
Analysts have said that the lack of new issuance in the high-yield market could lead to a bounce in the secondary market as investors look to put cash to work.
The iTraxx Crossover index, used as a barometer of sentiment in the high-yield market, had broken firmly through the 300 basis point barrier and was trading at 292 basis points by 1517 GMT.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 38.9 basis points more than similarly-dated government bonds at 1555 GMT, 0.7 basis points less on the day.
After a fallow spell, the new issue pipeline continued to build on Thursday.
European uranium enrichment firm Urenco plans to sell a debut euro bond of about 300 million euros ($361.8 million) to refinance existing debt, it said on Thursday.
Urenco, which makes centrifuges and enriches uranium, has mandated ABN Amro, Dresdner Kleinwort Wasserstein and Morgan Stanley to manage the bond sale.
The banks said the deal would be launched soon, subject to market conditions, and would follow a pan-European roadshow in the week starting November 14.
The 2027 notes will offer a spread in the area of 55 basis points more than UK gilts, and the 2035 notes will offer a spread in the area of 58-60 basis points more than UK gilts, the source said.
The lead managers are Barclays Capital, J.P. Morgan Cazenove and RBCCM. Bond insurer FGIC UK Ltd will provide a guarantee that would enhance the bond ratings to a top notch triple-A.
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