Crossover chases Treasuries

The iTraxx Crossover index swung in a 10-basis-point range on Wednesday as US government bond yields pushed to 5-year highs before retreating, while in the primary market Italian power company Enel raised 5 billion euros.
The Crossover index, made up of 50 mostly "junk"-rated credits, had another volatile day, trading as much as 9 basis points wider intraday, but was back to unchanged at 206.5 basis points by 1455 GMT, a trader in London said. The recovery was driven by short-covering in Treasuries which fed through to better sentiment in the equity and credit markets.
"The market's pretty volatile at the moment," he said. "There's a lot of people putting on short-term trades and chasing each other's tails ... it can make you feel quite dizzy." But with the market being driven almost entirely by external factors, it is difficult to predict where the index goes next.
"This morning it felt like the world was going to end, and a lot of people got quite short. We're just seeing an unwind of that right now," he said. Single-name credit default swaps were little changed, with almost all of the trading going on in the indexes as the most liquid instrument available to cope with the sudden shifts in sentiment.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 41.7 basis points more than similarly-dated government bonds at 1524 GMT, 0.3 basis points more on the day.
In the primary market, utilities and telecoms were in focus, with Enel leading the charge with a sale of 5 billion euros worth of bonds in euros and sterling to help fund its joint purchase of Spain's Endesa. All of the five tranches of the deal were priced at the tight end of guidance as order books built strongly.
But one trader at a bank not involved in the sale suggested that the size - which was raised to the maximum 5 billion euros equivalent as demand built - and pricing of the deal were a bridge too far, as both the 10- and 20-year euro bonds traded up to 4 basis points wider after pricing. "The pricing was too tight, and the deal was a little bit too big," the trader said.
Elsewhere, British Telecommunications Plc, part of BT Group set guidance on a 3-part euro and sterling bond in a deal that is set to total up to 1.5 billion pounds. BT plans to price a 7-year euro bond at mid-swaps plus 50 basis points, a 10-year sterling bond at gilts plus 110 to 115 basis points and a 30-year sterling bond at gilts plus 150 to 155 basis points, a market source familiar with the sale said on Wednesday.
In high yield, meanwhile, German telecoms operator Versatel is lining up a 525 million euro 7-year senior secured floating-rate note via Merrill Lynch and J.P. Morgan. Initial guidance is in the area of 275 basis points over Euribor, a banker familiar with the sale said.