The cost of insuring against a default by Corus rose on Wednesday as traders said the steel company's offer to repurchase bonds was unlikely to be accepted by bondholders.
Five-year credit default swaps on Corus, the Anglo-Dutch company recently bought by India's Tata Steel, initially rose about 35 basis points on news of its plan to buy back 800 million euros of bonds due 2011 at 101 percent of face value.
But the CDS later fell to 130 basis points, 15 basis points wider on the day, as the fact the bond is currently trading at 106.5 made it unlikely the offer would be accepted by bondholders. That would ensure the credit derivatives contracts would have bonds deliverable against them.
"Corus was a bit of a wild man this morning," said a trader. "But it's unlikely that anyone is going to hit that bid." Elsewhere, five-year CDS on German bathroom fittings maker Grohe tightened around 20 basis points after "a positive conference call, subsequent to good figures," the trader said. By 1537 GMT, the CDS were indicated at around 400 basis points.
German chemicals firm Cognis set price guidance on the 1.65 billion euro equivalent of senior secured floating-rate notes and loans it is issuing as part of a refinancing. Five-year CDS moved just five basis points tighter at 315 basis points.
By 1445 GMT, the iTraxx Crossover Index, made up of 50 mostly "junk"-rated bonds, was steady at 204.5 basis points after opening up 3 basis points tighter, despite a rise in the US Dow Jones industrial average to another record.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 44.3 basis points more than similarly dated government bonds at 1445 GMT, 0.1 basis points more on the day.
After the lull of Tuesday, the primary bond market came alive on Wednesday, with Network Rail setting a record with a debut inflation-linked bond and, at the other end of the credit spectrum, four high-yield deals being announced, including Cognis.
Network Rail, which runs Britain's rail infrastructure, sold a 1 billion pound 30-year index-linked bond, making it the largest ever non-government, inflation-linked bond. Orders for the bond totalled nearly two billion pounds, lead managers Barclays Capital, RBS and UBS said in a statement, with 91 percent of the deal sold to UK investors.
In high-yield, FCE Bank, a British financing unit of US automaker Ford Motor Co, sold a 1 billion euro bond due 2013 that came in at 287 basis points over mid-swaps, tighter than initial guidance of around 295 basis points over, suggesting good demand.
Car rental firm Europcar Groupe S.A., owned by Eurazeo, announced plans to add 255 million euros to two existing bonds in order to refinance a bridge loan taken out to acquire Vanguard's European business. And SGL Carbon, a maker of graphite electrodes, sold a convertible bond and is planning a 200 million euro floating-rate senior note as part of a refinancing.
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