European credit derivatives markets opened slightly stronger on Thursday, buoyed by marginal tightening overnight in US spreads and a late rally on Wall Street.
The benchmark iTraxx Crossover index, a key indicator of risk appetite in the CDS market, opened 3bp tighter at 222bp, according to one dealer.
Among the single names, Altadis was an early mover. The cigarette maker widened 3bp to 87.5 on reports that bids from both Imperial and buyout house CVC were imminent.
A separate report in Europa Press suggested the bidders might wait until 13th August when the new Spanish Takeover Code comes into force.
Commenting on the report, RBS analysts said they would be surprised if this latter came to pass. “We continue to advocate being short risk/long protection on the basis of the substantial widening that would occur if CVC wins (given the absence of deliverability issues). We expect CVC to bid aggressively following a couple of missed deals (notwithstanding the market widening). At the same time, Imperial have boxed themselves in through committing themselves to retaining an investment grade rating, whilst at the same time promising equity holders that they will not overpay,” they added in a note to clients.
Elsewhere in the credit markets, corporates have begun to postpone bond issues until market conditions become more favourable.
[Correction: Carphone Warehouse, which we said had called time on their bond issue, have said their issue will proceed as planned.]