European credit default swap indices inched tighter on Friday, after US payrolls and consumer sentiment data came in slightly stronger than expected, easing concerns the US economy may be slowing so fast that it risked damaging the economic outlook for companies.
Single-name trading was subdued, traders said, before the US Labour Day holiday on Monday and with a raft of new bonds expected to be issued this month.
The iTraxx Crossover index, made up mainly of high-yield names tightened by 2 basis points to a mid-price of 239 basis points, while the iTraxx Europe was 3/8 of a basis point tighter at 27 basis points, an index trader said.
US employers added a moderate 128,000 workers to their payrolls in August, in line with expectations, according to a government report that suggested the Federal Reserve might not need to raise interest rates further.
"Most of today's data has been in line and the market is a little bit firmer. The hourly earnings were a bit weaker, which is bond friendly. And the University of Michigan consumer sentiment data was revised up from the poor initial reading. All in all it suggests the slowdown is progressing at a level pace," Hans Peter Lorenzen, a credit strategist at BNP Paribas said.
US consumer sentiment was stronger than expected in August, though expectations of the future economic situation worsened, University of Michigan data showed.
The University of Michigan's final reading on consumer sentiment in August was 82.0, compared with an expected 79.5 in a Reuters survey. The number was above an initial mid-month reading of 78.7 but short of July's final reading of 84.7, sources who saw the subscription-only report said.
In the autos sector, the cash bonds of US carmakers Ford and General Motors both rose a quarter of a point on the day.
General Motors' 8.375 percent euro bond due in July 2033 was trading at 85 percent of face value at 1403 GMT, and Ford Motor Co's 4.875 percent bond due in January 2010 was trading at 94 percent of face value, a second trader said.
"Everything's a little bit firmer, but it's not the busiest of days today - it's very quiet," the first trader said.
In the wider, cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 52.2 basis points more than similarly dated government bonds at 1427 GMT, unchanged on the day.
In the primary market, German industrial conglomerate Siemens, Societe Air France and Britain's United Business Media will roadshow their planned bonds next week, leading the way for a wave of new issuance expected in September.
Siemens plans to issue euro- and sterling-denominated hybrid bonds, the banks managing the sale said.
Ratings agency Standard & Poor's said in a statement that the bonds would total up to 1.5 billion euros ($1.93 billion) and would help to finance Siemens's 4.2-billion-euro acquisition of Bayer's diagnostics division.
Hybrid bonds combine features of debt and equity, ranking lower down the repayment queue than standard senior debt, but paying a higher rate of interest. They can boost a borrower's balance sheet while protecting its credit ratings.
UBM will roadshow a benchmark-sized euro bond with a maturity of about 5 years from Monday to Thursday next week, and Societe Air France is meeting investors about its planned "long seven-year" euro bond. Societe Air France is a unit of Air France KLM, the world's largest airline by revenues.