European credit indexes moved tighter on Thursday on the back of some strong results and hopes for a comprehensive US bank rescue plan, while the primary issuance market continued to flourish. By 1542 GMT, the investment-grade Markit iTraxx Europe index was at 168.5 basis points, according to data from Markit, 4.25 basis points tighter versus late on Wednesday.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 1,052.75 basis points, 0.75 basis points tighter. British chemical company Ineos Group said on Thursday it had passed a year-end leverage test set with its bankers when it got a waiver on loan covenants, according to its own financial estimates.
Credit derivative markets have for some time been pricing in a relatively high risk of default for Ineos, one of the biggest issuers in the European high-yield market, as shown by the cost of buying protection against its debt. Europe's sixth-biggest automaker Italy's Fiat, which is planning an alliance with US carmaker Chrysler, revealed a debt pile three times its own forecasts on Thursday.
Five-year CDS on Fiat were wider at 20 percent upfront and 22 percent upfront versus a mid-point of about 18 percent upfront on Wednesday, a trader said. An Italian newspaper reported earlier the automaker was weighing a capital hike of about 2 billion euros for a possible merger with Frances's PSA Peugeot Citroen. Fiat called the rumours groundless. Meanwhile, the primary market remained active with new issues coming from ENI, SNCF, Casino and ICO.