Having fallen steadily last week, the appetite for risk in Europe wobbled on Monday as a raft of investment-grade companies sought to raise money in the bond market.
Non-financial investment-grade companies have already raised €153bn this year, leaving issuance just €13bn short of making 2009 the second strongest year ever for the eurobond market.
Amongst the names preparing to tap the bond market on Monday were E.ON, the German utility, and Lafarge, the French cement group which earlier in the year launched a €1.5bn rights issue as part of a €4.5bn package aimed at strengthening its financial position.
By Midday the Markit iTraxx Europe, which tracks credit default swaps of the 125 most traded investment-grade names, and which last week moved almost 10 basis points wider, was trading at 137bps, around 3bps wider than Friday’s close, according to data from Markit.
Meanwhile, the Markit iTraxx Crossover index, comprising the 45 most liquid entities in the junk-rated community, was marginally tighter at 800bps, compared to Friday’s close of 801bps. Earlier in the day the index had moved wider, at one point trading at 803bps.
In Japan the risk appetite dwindled as concerns for exporters and banks drove Tokyo shares down. The Japan iTraxx Series 11 traded at 245bps, compared to 235bps on Friday.
Of the single names, the cost of protecting against the default of Porsche, the heavily indebted German sports-car maker, increased after Volkswagen said it was postponing indefinitely talks of a planned integration.
The company’s CDS was 70bps wider at 415/445bps on Monday morning.