European corporate bonds fell on Tuesday, extending recent losses as concern over inflation and declining equities dampened investor appetite for credit.
The sell-off abated in the afternoon, traders said, as US stock markets steadied following recent drops and a US government report showed producer prices accelerated less than expected last month.
Still, European credit was weaker across the board, with highly rated financial borrowers and insurers suffering alongside the lower-rated high yield market.
Hannover Re's 5 percent perpetual bond callable in 2015 traded 7 basis points wider late in the day at 154 basis points more than government bonds, said one trader.
Among crossover credits, the cost of default protection on Scandinavian airline SAS rose as much as 30 basis points in early trade before settling 15 basis points wider, bid at 380 basis points, said another trader.
Europe's largest fine-paper maker, M-real, also widened about 30 basis points, he said, before closing 15 wider at 375 basis points, while most of the crossover sector ended the day 5 to 10 basis points wider.
The iTraxx crossover index was 5 basis points wider on the day at 251 basis points.
In the telecommunications sector, the spread on France Telecom's 8.125 percent bond due in January 2033, one of the most liquid in the industry, widened around 3 basis points to 141 basis points over government bonds, a trader said.
"We had a huge sell-off in equities yesterday, which spooked the market earlier this morning. Protection went a bit wider, and on the back of that, there's been general bond-aversion," another trader in London said.
"Everyone generally thinks spreads are at the tight end of the cycle ... and no one really wants to buy a lot of bonds at current levels."
In autos, spreads on bonds from German-US carmaker DaimlerChrysler widened about a basis point, he said, while subordinated bonds from banks and insurers stood 3 to 4 basis points wider since the start of the week.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 46.9 basis points more than similarly dated government bonds at 1515 GMT, unchanged on the day.
Saint-Gobain, the world's biggest listed building materials company, set spread guidance on its planned sale of benchmark-sized five- and 10-year euro bonds.
The five-year bond will be priced to yield in the area of 40 basis points over mid-swaps and the 10-year bond in the area of 70 basis points over swaps, a banker familiar with the deal said.
Last week a company official said proceeds from the bond sale would refinance the bank debt backing Saint-Gobain's purchase of British plasterboard maker BPB and to fund general corporate purposes.
Volkswagen Leasing, a subsidiary of German automaker Volkswagen, sold a 1 billion euro ($1.3 billion), five-year bond on Tuesday, the banks managing the sale said.
The bond pays a coupon of 4.125 percent and was sold at 99.518 percent of face value to yield 34 basis points over swaps. It was unchanged in the secondary market shortly after sale, a trader said.
Volkswagen Leasing, which leases cars to private and corporate customers, is a unit of Volkswagen Financial Services, Europe's largest provider of auto finance services.