European credit spreads tightened on Wednesday, boosted by a planned European 200 billion euro ($259 billion) stimulus package, but trading was thin ahead of the US Thanksgiving holiday. By 1709 GMT, the investment-grade Markit iTraxx Europe index was at 163.5 basis points, according to data from Markit, 6.5 basis points tighter versus late on Tuesday.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 873.5 basis points, 4.5 basis points tighter. Narrower spreads were broad-based, with tightening credits outnumbering names that widened by two to one, Markit said.
Italian aerospace and defence company Finmeccanica bucked that trend. Its five-year credit default swaps widened by about 75 basis points to 308 basis points, Markit data showed, after it sold a 750 million euro ($972 million) five-year bond at mid-swaps plus 475 basis points.
This is the second issue by a triple-B rated borrower since the bankruptcy of Lehman Brothers slammed the credit markets in mid-September, following German retailer Metro AG five-year 500 million euro bond sold last week. In the non-guaranteed cash market, Total Capital, an arm of double-A-rated French oil major Total SA, planned a five-year euro benchmark, with guidance at mid-swaps plus 150 to 160 basis points.
That is a premium of 56 to 66 basis points over Total's five-year credit default swaps, which were about 94 basis points at the end of Tuesday, according to Markit data. Total's CDS widened by 4.5 basis points to around 98 basis points early on Wednesday.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 297.2 basis points more than similarly dated government bonds, 1.2 basis points more on the day. In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 2.224 percent, 3 basis points less on the day. The 10-year Bund yielded 3.319 percent, 2.2 basis points less. The 10-year euro swap rate was 4.160 percent.
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