European corporate bond spreads tightened on Wednesday, with little specific news to spark moves in individual borrowers but firmer equities and sliding oil prices forming a positive backdrop for credit.
An unexpected 1.1 million barrel rise in US crude stocks pushed oil prices further down after Tuesday's drop of more than $2 a barrel, supporting equity markets, while an upward revision of US economic growth also helped sentiment.
"Corporates are pretty quiet - the new issue market is not quite closed but is really working on a very subdued level," one London trader said.
"The higher-yielding paper has rallied over the last 24-36 hours: oil's selling off and equities are rallying, which is all mildly positive to neutral."
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 39.8 basis points more than similarly dated government bonds at 1515 GMT, 0.2 basis points tighter on the day.
The cost of credit protection on Germany's HeidelbergCement continued to fall after dropping on Tuesday when rival Spohn Cement detailed its takeover funding plans, which were less damaging to HeidelbergCement's credit profile than many had feared.
Five-year credit default swaps on HeidelbergCement traded about 30 basis points tighter at 200 basis points, the trader said. That means it costs 200,000 euros to insure 10 million euros of the company's debt against default.
Autos and telecoms bonds, including benchmarks from Telecom Italia and France Telecom, tightened slightly as overall sentiment improved, a second trader said.
France Telecom bonds and credit default swaps tightened in line with the broader market, little moved by its announcement of a new strategy involving a doubling of dividend payments, but a continued focus on cost cutting.
The company's 8.125 percent euro bond due January 2033 was two basis points tighter at 96 basis points over government debt.
General Motors Corp's 8.375 percent euro bond due 2033 was bid at 82 percent of face value, about 0.75 points higher but off an earlier high of 83 percent, the second trader said.
Ahead of US car sales data due on July 1 and then earnings statements from the US automakers later in July, there is little impetus for trading, a third trader said earlier.
The high-yield market held its positive tone as investors awaited the pricing of a 400 million euro bond from South African mobile phone operator Cell C.
"The market continues to tighten," said a high-yield trader. "We've seen decent retail buying of cash bonds, although not in much size."
The iTraxx Crossover index, a barometer of sentiment in the high-yield market, stood about 4 basis points tighter at 305 basis points, he said.
In the primary market, now calming after a hectic month, a banker familiar with the deal said French construction- to-telecoms group Bouygues had increased the size and refined the price guidance on its planned 15-year bond, which it will use to extend the average maturity of its debt.
The bond, scaled up to 600-750 million euros from 500 million euros, will price on Thursday to yield 72 basis points over swaps, the banker added.
This is at the low end of earlier guidance for a yield of "low-to-mid 70s" basis points over swaps.