Bonds: crossover index widens

The iTraxx Crossover index, a proxy for risk sentiment in the European credit market, widened on Wednesday on concerns about the state of the US economy.
The Crossover index widened 12 basis points to a 236.5 basis point mid-price, a trader said, as US stocks slid after Federal Reserve Chairman Ben Bernanke cast doubt about a recovery in housing and said uncertainties around the US economy have increased somewhat.
He said future Fed decisions will depend on what happens to both inflation and growth. "The Crossover is following the Dow," a trader said. The Dow Jones Industrial Average was down 107.03 points at 12,290.26 at 1522 GMT.
"I think the market is now beginning to understand what wasn't so clear last week - that actually they (the Fed) are more concerned about growth, about housing and that they are more concerned about inflation in particular," Bob Janjuah, a credit strategist at the Royal Bank of Scotland said.
"I guess the market senses that Bernanke would like to cut rates to support the housing market and to support growth but inflation is not coming down anywhere near the pace he thought it would. And that's a problem for the Fed," he said.
He said all eyes would now be on Friday's US personal consumption expenditure data, which is seen as the Fed's preferred inflation gauge. Elsewhere, five-year credit default swaps on UK retailer Next widened 3 basis points to 62 basis points, on continued bid talk.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 46.4 basis points more than similarly dated government bonds at 1620 GMT, 0.9 basis points more on the day.
In the primary market, GlaxoSmithKline Capital Plc, a unit of Europe's biggest drugmaker, has fixed the final terms on a 1 billion sterling ($1.97 billion) 35-year bond it plans to sell, an official at a lead manager said.
The bond from the maker of brands such as Panadol painkillers, Aquafresh toothpaste and Lucozade will be priced to yield 87 basis points over Gilts, the official said, in the middle of earlier guidance of 85 to 90 basis points over Gilts.
And French minerals processing group Imerys has priced a 10-year, 500 million-euro bond, which a syndicate official said drew 1.9 billion euros of orders from investors.
The bond was priced at 99.715 percent of face value, with a coupon of 5 percent to yield 75 basis points over mid-swaps, tighter than earlier guidance of "high 70s" basis points over mid-swaps, the banks managing the sale said.