CDS action in the likes of Ireland, Portugal, Spain, Greece, Italy and the Czech Republic was the main topic of conversation in credit markets talking on Wednesday morning.Ireland was forced to deny reports that the country could seek help from the IMF. Nevertheless, its cost of protection in derivatives markets edged close to the record high reached on 5 December, 2008. - the CDS jumping 22bp on Wednesday morning to 215bp, according to CMA Datavision.
CDS for Spain, which was put on watch for downgrade by S&P this week, widened 9bp to 118.5bp, while Greece moved out 8bp to 240.8bp. Movement in Italian CDS was relatively muted, edging out 2bp to 164.8bp, according to CMA.
The iTraxx Europe list of investment grade companies inched 2bp-3bp wider at 169.5bp late on Wednesday morning, after opening at 164bp-167bp. The index is trailing weaker performances on Wall Street and European equities, a trader said.
New corporate issues continue to hit the main bond markets. France Telecom has presented investors with a five-year benchmark bond priced at 210bp over mid-swap, traders said, noting that the coupon proposed for the new bond was about 50bp cheaper than the company’s outstanding bonds, leading some to suggest that the issue might struggle.
Deutsche Telekom’s newly priced eight-year corporate bond began trading on Wednesday morning at 317bp over the German government Bund, but slipped slightly later in the day.
Fresenius, the pioneering high-yield bond issuer of 2009, remains the focus of sub-investment grade investors. A portfolio manager for an European asset manager said he expected the German healthcare group to call off issuing any Euro-dominated bonds, as US investors have “swamped in to gobble up the issue”. Roadshows to market the $650m of senior secured bonds are rolling on in Europe this week. CDS protection narrowed to 351bp from 363.9bp yesterday, according to CMA.
