Nervousness in the market ahead of key inflation data in the US and after strong inflation figures reported in the UK weighed on European credit derivatives markets on Tuesday.
Meanwhile, some single name credit default swaps, a kind of insurance against the non-payment of debt, were volatile on company-specific news.
The cost of insuring against a default for Valeo, the French auto parts maker, initially fell 15bp to 104bp following a report in La Tribune that the company will consider a capital increase in a bid to ward off a possible takeover attempt. However, Reuters has reported a Valeo spokesperson saying that the issue, which is on the agenda of a shareholder meeting is a formality and has nothing to do with any potential offer.
Valeo’s CDS widened further to 111bp late morning, meaning it now costs €111,000 a year to €10m of Valeo debt against default over five years.
Meanwhile, Telecom Italia’s five-year CDS contract widened 3bp to 41bp on news that AT&T in the US has pulled out of exclusive talks to buy a stake in Olimpia, which controls Telecom Italia.
The overall market was trading wider, with the iTraxx Crossover index of junk-rated credits moving 2bp wider at a mid-price of 201.5bp while the main iTraxx Europe was also slightly wider at just over 23bp.