The cost of default protection on Akzo Nobel rose on Monday as credit markets gave a thumbs down to its predatory ambitions after Britain's Imperial Chemicals Industries (ICI) rejected a $14.2 billion bid. Five-year credit default swaps on the Dutch chemical company traded 1 basis point wider at 22 basis points, a dealer said, while ICI held steady at 29 basis points.
"Akzo is a bit wider on the bid, but generally we are stronger again today," said a trader in London. "It's a solid opening." ICI early on Monday confirmed that it had rejected a take-over proposal from Akzo, saying it undervalued the company.
Elsewhere, the cost of default protection on Altadis rose amid speculation private equity group CVC plans to formalise its 12.8 billion euro ($17 billion) bid in the near future. Five-year default swaps on Altadis traded 3 basis points wider at 64.5 basis points, according to Deutsche Bank.
The iTraxx Crossover index rallied on Monday, reflecting a better tone in stock markets after key US inflation data on Friday suggested consumer price growth in the world's largest economy is under control. The Crossover index, made up of 50 mostly "junk"-rated credits, traded 2 basis points tighter at 193 basis points by 0745 GMT, a trader in London said.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 41.1 basis points more than similarly dated government bonds at 1440 GMT, 1.2 basis points lower on the day. In the primary market, investor roadshows ended on Friday for Delhaize America, the US subsidiary of Belgium-based supermarket group Delhaize.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 41.3 basis points more than similarly dated government bonds at 0750 GMT, 0.2 basis points wider on the day. In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 4.487 percent, 1.6 basis points down. The 10-year Bund yielded 4.642 percent, 0.3 basis points lower. The 10-year euro swap rate was 4.927 percent.