Telefonica debt rallied on Tuesday after the Spanish telecoms giant said it was studying its options regarding its 60 percent stake in yellow pages directory TPI.
Elsewhere, credit default swaps on General Motors Acceptance Corp (GMAC), the finance arm of GM, were volatile as GM's planned sale of a stake in GMAC dragged on.
Telefonica said it did not rule out a whole or partial sale of its stake in TPI, which has a market capitalisation of about 3 billion euros.
"Obviously if they get some cash in the door it reduces the amount of (further) financing they need to do on the O2 acquisition," a trader in London said.
Telefonica sold bonds worth nearly 6 billion euros in January to help refinance its 17.7 billion pound take-over of Britain's O2.
The 3.75 percent euro bonds due February 2011 which Telefonica sold as part of that deal tightened 3 basis points, to be bid at 72 basis points over government debt, the trader said.
In the keenly watched autos sector, default swaps on GMAC reversed an earlier rally that had been sparked by a newspaper report that GM was seeking a quick sale of a majority stake.
Five-year credit default swaps on GMAC stood at 475 basis points by mid-afternoon, up from 450 basis points earlier, but still less than Monday's 500 basis points.
GM has been trying to sell GMAC for months in the hope of restoring the finance company's credit rating to investment grade.
Elsewhere, the cost of insuring debt in Dutch market research company VNU against default fell, after a source familiar with the matter said European private equity firm Permira had dropped out of the seven-strong private equity group bidding for VNU.
Five-year default swaps on VNU dropped some 20 basis points, to 225 basis points, one dealer said, meaning it costs 220,000 euros a year to insure 10 million euros of the company's debt against default.
Credit investors fear leveraged buyouts (LBOs) by private equity groups, which are financed by loading a target company's balance sheet with debt, knocking its creditworthiness.
In the utilities sector, sentiment was calm, but credit default swaps were still moving as Gas Natural held a key board meeting about taking over Spanish utility Endesa.
Germany's E.ON topped Gas Natural's original offer for Endesa, sparking political uproar in Spain.
"E.ON is the only one moving at the move," said a trader in London. Five-year default swaps on E.ON rose one basis point to 23 basis points.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 48.7 basis points more than similarly dated government bonds at 1525 GMT, unchanged on the day.
The primary market saw a trio of deals, with South African power utility Eskom selling a 500 million euro, seven-year bond, priced to yield 50 basis points over swaps, and French property group Klepierre selling a 700 million euro, 10-year bond with a spread of 70 basis points over swaps.
Shell International Finance, a unit of oil major Royal Dutch Shell, also sold a 350 million euro bond due March 2009, at 17 basis points over equivalent government debt.