European credit indices inched wider on Monday afternoon, tracking weaker equity markets, while credit default swaps on ITV and Schneider Electric regained ground after previously moving higher on acquisition-related worries.
The bellwether iTraxx Crossover index, of mostly "junk"-rated credit default swaps, widened 5 basis points to 251.5 basis points, while the HiVol index, whose components have higher credit ratings, widened 0.75 basis points to 47.5 basis points, a trader in London said.
"We backed off the tights today, just due to the equities sell-off," the trader said. European shares languished close to their lowest level in more than a week, pulled down by mining stocks and mixed earnings, with Wall Street opening a touch lower after Wal-Mart Stores Inc's sales missed forecasts.
The market remained dominated by technical factors, the trader added, with demand for structured products underpinning investment-grade, and a recent rally across risk assets making high-yield relatively more appealing despite spreads at what he called "nose-bleed" tight levels.
Credit indexes have rallied for much of October, boosted by strong corporate earnings and the printing of structured credit products, with the Crossover's spread tightening 14 percent from October 5 to hit 244 basis points last Friday.
Five-year credit default swaps on Schneider Electric reversed an earlier rise to stand little changed at a 22 basis point mid-price, a second trader said, after the French electrical equipment group said it had agreed to buy American Power Conversion for about $6.1 billion in cash.
"From the credit side, they probably have enough cash and enough room in the rating to do this (without provoking downgrades)," he said. It was a similar story with ITV, whose CDS momentarily pushed wider on a Sunday media report that the British broadcaster was considering an offer for Scotland-based media group SMG.
Five-year default swaps on ITV recovered to stand little changed at a 105 basis point mid-price, a media trader said. ITV is Britain's largest commercial broadcaster and talk of offers for ITV itself has emerged repeatedly this year.
Saint-Gobain, the world's biggest building materials supplier, plans to sell benchmark-sized 10- and 18-year sterling bonds soon, an official at one of the banks managing the sale said.
A banker familiar with the deal said it was likely to conclude this week, with price guidance due on Tuesday morning, after a Monday afternoon investor call.
The sterling deal follows a 1.8 billion euro ($2.3 billion) sale of 5- and 10-year euro bonds in May to help refinance the take-over of UK plasterboard maker BPB.
Like that deal, this will contain a "change of control" clause allowing investors to sell the bonds back to the company in the event of a debt-heavy take-over, the banker said. In the high-yield market, chemicals maker Huntsman Corp said it planned to sell $400 million worth of high-yield bonds in dollars and euros, using the proceeds to redeem its more costly 10.125 percent senior subordinated bonds due 2009.
Huntsman plans to sell euro bonds due 2013, not callable for three years, and dollar bonds due 2014, not callable for four years, a banker familiar with the deal said, adding it was expected to conclude early this week.
Spanish gaming company Codere's planned 150 million euro increase of its 2015 euro bond will be priced at about 107.25 percent of face value, a banking source familiar with the matter said.
This is the second tap of the 8.25 percent bond this year, and will bring the high-yield note's total size to 650 million euros. Order books for the deal close at 1200 GMT on Tuesday, the source said.
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