Trading was quiet in the European market for credit derivatives on Tuesday morning with little news to provide direction for indices or single names as the market begins to wind down towards Thursday’s US Thanksgiving holiday.
Reports in the Finnish press raised the possibility that there could be private equity interest in the paper-products companies, Stora Enso and UPM, though even these only moved a couple of basis points wider, illustrating traders’ reticence about taking on any new bets.
ITV, the UK broadcaster that was a big mover on Monday, settled down with few new quotes crossing the screens. The companies credit default swaps, which provide a kind of insurance against non-payment of corporate debt, had dropped 60bp, or more than 33 per cent, yesterday to 115bp, meaning it costs Euro115,000 annually to insure Euro10m of debt over five years.
The cost of protection is still higher than two weeks ago when the current run up began on the back of takeover interest from rival NTL, suggesting the market still expects some increased leverage at ITV whatever the outcome of BSkyB’s attempts to block potential deals with its capture of a 17.9 per cent stake in the group.
Corus, another name in the frame for potential takeover, tightened a touch again this morning although traders said there was no news to go on. The UK steel group faces uncertainty with a bid battle looming between Tata Steel of India and CSN of Brazil.
The indices drifted tighter, lowering the cost of protection, on the back of stronger equity markets this morning. The iTraxx Crossover index of junk-rated companies tightened by about 2bp to 235.5bp, while the main iTraxx Europe index of investment grade companies was also a touch tighter at 24.125bp.
Paul.J.Davies@ft.com