European credit indexes rallied on Friday after better-than-expected US job figures and benign inflation data left investors less concerned about a slowdown in consumer demand and further interest rate hikes. The number of people in non-farm jobs climbed by 157,000 in May, beating the 130,000 average forecast in a Reuters poll.
The core personal consumption and expenditure index (CPE), a measure of inflation favoured by the Federal Reserve, rose just 0.1 percent, below the 0.2 percent median forecast. The iTraxx Crossover index, viewed as a barometer for risk appetite, tightened 1 basis point to 187.5 basis points, a trader said.
"The market's pretty firm," he said. "It's had a couple of goes to break through 190 (basis points), so it's not surprising that it breaks it decisively." However, the trader cautioned, "We've had a really long rally, but it's by no means certain that we're going to carry on." The index slipped slightly to 188.5 basis points in late trading, a second trader said.
In single names, the cost of insuring FKI Plc's debt against default tightened 10 basis points to 140 basis points at 1330 GMT, a trader said. The British engineering firm on Thursday said it had been approaching by an unidentified suitor about an offer at around 130 pence per share.
The company has only one bond outstanding, which may be paid off on any take-over, leaving the insurance worthless. CDS on telecommunications provider Virgin Media (formerly NTL) fell 5 basis points, a second trader said, as investors shrugged off news that ratings agency Standard & Poor's had cut the firm's outlook from positive to stable.
British Airways similarly saw its CDS drop 5 basis points to 75.5 basis points at 1330 GMT after Chief Executive Officer Willie Walsh played down speculation the airline was a target for private equity.
South African clothing and fashion retailer Edgars Consolidated Stores is preparing to issue 1.83 billion euros ($2.5 billion) of high-yield notes to fund its buyout by private equity firm Bain Capital. The sale would be split into 1.18 billion euros of 7-year senior secured floating-rate notes and 650 million euros of 8-year senior notes, with fixed and floating-rate tranches.
Ardagh Glass on Friday priced 310 million euros of 10-year high-yield notes to help fund its acquisition of the glass business of Britain's Rexam lead manager Citigroup said. The senior notes were priced at par with a coupon of 7.125 percent, the bank said, in the middle of earlier guidance of 7 to 7.25 percent. The notes cannot be called for five years.