Bonds: British Airways CDS tightens

21 Jun, 2007

British Airways was the name on trader's lips on Wednesday after Standard and Poor's raised the ratings of Europe's third largest airline to investment grade for the first time in four years. S&P lifted British Airways' long-term corporate credit rating one notch to BBB-, taking the airline from the highest notch in "junk" to the lowest in investment grade.
Five-year credit default swaps on BA tightened 19 basis points to 58.5 basis points by 1420 GMT, a second trader said, "It's not a shock," an analyst at Credit Suisse said. "I see mid-50s as the target spread level in the next couple of weeks." Elsewhere, the cost of insuring the debt of British publisher Pearson against default increased 1.5 basis points to 49.5 basis points, a trader said, noting that a lack of headlines had left many wondering about the underlying reason.
Conversely, despite media speculation that France's Renault and Swedish truck maker Volvo are interested in buying auto maker Volvo Cars from Ford Motor Co, CDS on all three automakers were unchanged.
In the wider market, the iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was unchanged at 96 basis points by 1340 GMT, returning after earlier tights. The index had traded at a day's tight of 95 basis points but lost ground gained after tracking falls in US government bond prices. In the primary market, Arcelor Finance added a dual tranche euro benchmark bond to the corporate pipeline. The bond, which will be managed by Calyon, Citigroup, Commerzbank and RBS, will consist of a five-year and a 10-year euro bond.
Elsewhere, telecom equipment maker Ericsson and British American Tobacco tightened guidance on their planned euro bonds. Ericsson plans to sell a 500 million 10-year euro fixed-rate bond at mid-swaps plus 52 to 54 basis points, and a 350 million euro seven-year euro floating-rate note mid-swaps plus 33 to 35 basis points.

Read Comments