European credit spreads tightened on Thursday, giving up some earlier gains as credit-specific headlines shifted investor attention towards gains in equity markets. By 1630 GMT, the iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 359 basis points, according to data from Markit, 7 basis points tighter versus on Wednesday.
The Crossover index had swung within a 10-basis-points range, largely tracking moves in equity markets. Traders said that the movement in spreads was not indicative of volumes as the approaching year-end had muted trading levels.
"There's just nothing. It's fairly quiet. There's very little going on," a trader said. The investment-grade iTraxx Europe index tightened 0.25 basis points to 55.5 basis points, recovering from having hit wides of 56.5 basis points.
The pan-European FTSEur-ofirst 300 rose 0.32 percent to 1,506.08. Meanwhile, the Dow Jones industrial average index was up 0.3 percent at 13,317.69. A second trader said that US autos names were also lifting credit spreads, with credit default swaps about 40 basis points tighter across the board, driven by technical trading and bid speculation. The trader did not specify companies involved.
In single names, the cost of insuring debt of Kelda Group against default rose sharply just three days after the British water utility agreed to be bought for $6 billion by a consortium of investment firms.
Five-year credit default swaps on Kelda were around 29 basis points wider at 121 basis points, according to Deutsche Bank prices. A trader said that the widening was due to technical trading with market makers battling for a fair price in spreads.
Elsewhere, CDS on British Airways tightened 10 basis points to 165 basis points, a trader said, citing an initial fall in oil prices and Tuesday's news that Alitalia has postponed its deadline to receive non-binding offers for the Italian airline.