Sainsbury’s credit default swaps widened on Monday after a report suggested the board was about to recommend a £10.6bn takeover bid from a fund backed by the Qatari government.
Five-year credit default swaps widened by 15 basis points, meaning it would cost an extra €15,000 to protect €10m of the UK retail company’s bonds against default over five years, to 300bp.
Delta Two, the fund backed by the Qataris, signalled it may put in a bid as early as this week, according to newspaper reports.
Overall, the market was fairly quiet with both the US and Japan on holiday.
The iTraxx crossover index, which tracks the 50 most-liquid European names in the mainly high-yield sphere, stood at 292bp mid-morning, a touch wider than the opening price of 289bp, while the Europe iTraxx index, which tracks 125 of the main European investment grade names, stood at 32.25bp after opening at 31.5bp.
The market was still being helped by the strong US non-farm payrolls on Friday. The number came in slightly higher than consensus expectations for September with an increase in jobs of 110,000. August was also revised up to an increase of 89,000 from an original estimate of minus 4,000.
Credit default swaps offer a kind of insurance against the non-payment of unsecured debt, usually corporate or sovereign bonds.