Market drifts wider as OTE sells bonds

Greek telecoms operator OTE on Tuesday sold 1.5 billion euros ($1.9 billion) of a two-part bond, attracting around 5 billion euros of orders as the primary market took centre stage amid subdued secondary trading.
OTE sold a 600 million euro three-year floating-rate note at par with a coupon of three-month Euribor plus 28 basis points, and a 900 million euro May 2016 bond at 99.20 with a coupon of 4.625 percent, giving a spread of mid-swaps plus 78 basis points.
Proceeds will refinance mobile subsidiary Cosmote's acquisition of Germanos. Both deals were in line with guidance given early on Tuesday, and the final spreads were 2 basis points tighter than initial talk, usually a sign of good demand. Investors said on Monday the bonds looked cheap, indicating the company was willing to price the deal to ensure success.
Elsewhere, trading was quiet for a second day, traders said, as consolidation continued following a month-long rally that led to record tight spreads and then a partial retreat last week.
Strong corporate earnings and equity markets and low default rates as well as record levels of demand for credit and credit derivatives have compressed spreads and pushed fixed income markets to historical highs.
However, even strong results from heavyweight telecoms borrowers including Vodafone, Telefonica and Telekom Austria failed to stir any enthusiasm for pushing the rally further.
"It's gone very, very quiet," one trader said. "We are drifting wider, but there is very little activity." All three telecoms companies reported results in line with or ahead of forecasts, with both Telefonica and Telekom Austria lifting their outlooks for the year. Five-year credit default swaps on Telefonica traded 1.0 basis point wider at 39 basis points, the trader said, in line with the wider market.
Earlier the cost of default protection on ITV continued a recent ascent as investors awaited further news on a possible tie-up with junk-rated cable firm NTL. Five-year protection on ITV rose about 5 basis points to 180 basis points, while NTL traded unchanged at 350 basis points after declining around 20 basis points in earlier trade. The company's stock edged higher in New York on Tuesday after falling on Monday.
NTL is likely to bid up to 5 billion pounds for ITV, mostly in cash, a source familiar with the matter told Reuters on Saturday. The iTraxx Crossover index, made up mostly of "junk"-rated credits, was 2 basis points wider at 242.5 basis points, a trader said.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 50.2 basis points more than similarly-dated government bonds at 1555 GMT, 0.1 basis point less on the day.