Telecommunications bonds were in focus on the European credit markets on Wednesday, amid subdued trading ahead of the Easter holidays. The cost of default protection on Dutch telecoms group KPN rose after shareholders on Tuesday voted against a new mechanism to ward off hostile take-overs, leaving the telecoms firm more vulnerable as a target in a consolidating industry.
Five-year default swaps on the company traded 3 basis points wider, a trader said, at 85 basis points, meaning the cost of protection rose 3,000 euros per 10 million euros face amount.
"We have seen a bit of activity in telecoms but nothing too directional," the trader said. "KPN is a more likely bid target now but there is no bid there."
Belgacom chief executive Didier Bellens denied a bank analyst report on Wednesday that he was holding merger talks with rival KPN, but said he is interested in acquisitions to strengthen all the group's businesses. Earlier, the spread on KPN's 4.5 percent euro bond due July 2011 widened four basis points, to be bid at 103 basis points over government bonds.
Elsewhere in the sector, the cost of default protection on France Telecom fell one basis point to 37 basis points, a trader said, as sentiment picked up in the afternoon after a weaker morning.
"With little credit specific news to focus on equities have been the main driver," he said. "It will probably be the same tomorrow and we will have to wait until after Easter for direction."
European shares trimmed losses as US stocks rose on opening, while Vodafone shares gained on talk US peer Verizon may soon make an approach for the UK mobile phone giant's 45 percent stake in Verizon Wireless.
The FTSEurofirst 300 was 0.2 percent lower near the close, up from one-month lows of 1,358.44. Britain's FTSE 100 was 0.2 percent lower at 6,001 points, recovering from earlier lows of 5,974.5.
The iTraxx Crossover index of credit default swaps, containing mostly non-investment grade names, closed bid at 268 basis points, after earlier widening to 273 basis points, according to Barclays Capital.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 47.6 basis points more than similarly dated government bonds at 0752 GMT, unchanged on the day.
Elsewhere, the cost of default protection on troubled US auto maker GMAC tightened 5 basis points as sentiment continued to improve around the unit, a controlling stake in which is set to be sold by parent General Motors.
Five-year swaps on GMAC have tightened 25 basis points in the past two days to 350 basis points.
In the primary market, Dutch property group Rodamco Europe, which owns and manages shopping centres around Europe, sold a five-year, 500 million euro bond, the banks managing the sale said.
The deal drew 1.2 billion euros of orders from about 80 investors, said Philippe Bradshaw, head of European corporate syndicate at ABN Amro, which managed the deal with J.P. Morgan.
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