EURO CORP-Credit spreads tighten, DSGi CDS wider

Reuters: [2008-05-15 17:42:00]

By Natalie Harrison

LONDON, May 15 (Reuters) - The cost of insuring retailer DSG International's debt against default rose on Thursday on disappointment over its turnaround plans, while broader credit spreads edged tighter in thin newsflow.

Five-year credit default swaps on DSGi <DSGI.L> widened by 5 basis points to 335 basis points, a trader said, and was the main standout in the retail sector which was broadly tighter in line with with the rest of the market.

DSGi shares also fell more than 10 percent as analysts warned that efforts by the company -- Europe's biggest specialist electricals retailer -- to cut costs and lower its dividend would not be enough to bolster the group's fortunes [ID:nL1575275].

DSG is currently rated Baa3 by Moody's Investors Service and BBB- by Fitch Ratings, both the lowest notch of investment grade ratings.

"There was no silver bullet in the review, with a turnaround likely to take some time," said Rob Orman, a credit analyst at RBS.

"I think there is a strong chance that at least one agency will cut them to junk in the next couple of weeks."

The cost of insuring Tesco debt against default was resilient however, despite a report from Moody's which said it may cut the UK supermarket's group A1 rating. The rating action cited concerns about Tesco's "weaker than expected credit metrics" and its planned acquisition of 36 discount stores from South Korea's E-Land, announced on Wednesday, Moody's said.

Tesco five-year CDS were 2 basis points tighter at 28 basis points, the trader said.

INFLATION WORRIES

In the wider credit market, the Markit iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 419.5 basis points by 1512 GMT, according to data from Markit, 8.5 basis points tighter versus late on Wednesday.

The investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 69.5 basis points, 2.5 basis points tighter.

Geraud Charpin, a credit strategist at UBS, said there was little news driving credit derivative indexes tighter.

"If nothing much is happening, we tend to grind tighter in credit. We're still seeing a trickle of short covering and there is no big negative news, so there is no momentum for people to reset shorts," Charpin said.

U.S. data on Thursday showed softer-than-expected U.S. industrial output for April, which followed a weak manufacturing report from the New York Federal Reserve. Jobless claims also rose slightly more than expected in the latest week.

In Europe, the economic position is still somewhat brighter, however, as strong business investment helped drive German growth. But there are clouds on the horizon, notably weak consumer demand as soaring commodity prices push up the cost of fuel, food and other essentials.

Data earlier this week also showed a shock jump in UK inflation. The Bank of England revised up its inflation forecasts, suggesting there was little scope for further rate cuts, despite predictions of sharply slowing growth or even a recession.

"The inflationary pressures we are seeing make it harder for both the U.S. and Europe to fight against slumping growth. That fear is delaying the economic recovery so it should be seen as a negative," said Charpin.

(Reporting by Natalie Harrison; Editing by Andrew Callus)

((natalie.harrison@reuters.com; +44 207 542 2687; Reuters Messaging: natalie.harrison.reuters.com@reuters.net))

* Reuters clients can view related news by double clicking on:

[EUB] All Eurobond news

[DBT] Debt reports

[EUB-ISU] New debt issues

[IGD] Investment-grade bonds

[HYD] High-yield bonds

[ABS] Asset-backed securities

[CDV] Credit derivatives news

[AAA] Credit ratings news

[TOP/DBT] Top fixed income news

[TOP/CREDIT] Top credit news

Other market reports:

[GVD/EUR] Euro government debt report

[US/] U.S. Treasury market report

[USC/] U.S. corporate bond report

[.EU] European stock market report

[.L] UK stock market report

[.N] Wall Street report

Guides:

For prices or rates, double click on: <EUROBONDS>

For credit ratings, double click on: <RRS0001>

For credit derivatives, double click on <CDSINDEX>

For top corporate bond issuers, double click on <0#TOPISSUER>

Keywords: MARKETS BONDS EUROCORP

EURO CORP-Credit spreads stable, bond issuance seen lighter

Reuters: [2008-05-15 10:49:00]

By Maya Thatcher

LONDON, May 15 (Reuters) - European credit spreads held up well on Thursday amid thin news flows, even after British bank Barclays <BARC.L> said its first-quarter profits were down.

By 0835 GMT, the Markit investment-grade iTraxx Europe index <ITRAC5EA=GFI> was unchanged at 72 basis points, according to Markit data, versus late on Wednesday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 0.75 basis points wider at 428.75 basis points.

"We are unchanged from yesterday. Markets are pretty stable," a London-based trader said.

Barclays did not disclose the amount its first-quarter profit fell by and refused to rule out a rights issue following a 1 billion pound ($1.95 billion) writedown. [ID:nL15355889]

That had little impact on the cost of insuring Barclays debt against default. Five-year credit default swaps on Barclays were 1 basis point wider at 66 basis points, the trader said.

Traders said they had been expecting the news and were not surprised by the market's muted response.

"Everything is so well flagged these days ... it's all discussed days in advanced, and the market's prepared for it. There's no big surprise," the first trader said.

Shares in the company were down nearly 2 percent.

"This cannot be the end of the story here given the group's ambitious growth plans ... our bet remains a private placement of some sort," credit strategists at RBS wrote in a note to clients.

"Until we see positive action regarding capital and a few more marks on the riskier items held on balance sheet we would expect to see CDS leak wider versus the index."

In data from the U.S., possible market movers include jobless claims, the Philadelphia Fed business index and April industrial production. [ECI/US]

BOND ISSUANCE

A major talking point among traders and strategists was Wednesday's flood of primary market issuance, including large bond sales from France Telecom <FTE.PA>, consumer goods maker Unilever <ULVR.L> and German carmaker Daimler <DAIGn.DE>.

"If the primary markets are anything to go by then the worst of the crisis is certainly behind us as the euro credit market swallowed a barrage of supply in euro corporates that it has not been exposed to for a long time," credit strategists at ING wrote in a note to clients.

But the trader said bond issuance on Thursday would likely be slacker than the previous session.

"Less today. A lot of the big ones are been and done now. So that's it for three months for those guys," the trader said.

In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 110.4 basis points more than similarly dated government bonds, 1.3 basis points less on the day.

In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz <EU2YT=RR> was 3.986 percent, 7.8 basis points more on the day. The 10-year Bund <EU10YT=RR> yielded 4.226 percent, 5.4 basis points more.

The 10-year euro swap rate <EURAB6L10Y=> was 4.657 percent. (Reporting by Maya Thatcher; editing by David Hulmes) ((maya.thatcher@reuters.com; +44 207 542 9202; Reuters Messaging: maya.thatcher.reuters.com@reuters.net))

* Reuters clients can view related news by double clicking on:

[EUB] All Eurobond news

[DBT] Debt reports

[EUB-ISU] New debt issues

[IGD] Investment-grade bonds

[HYD] High-yield bonds

[ABS] Asset-backed securities

[CDV] Credit derivatives news

[AAA] Credit ratings news

[TOP/DBT] Top fixed income news

[TOP/CREDIT] Top credit news

Other market reports:

[GVD/EUR] Euro government debt report

[US/] U.S. Treasury market report

[USC/] U.S. corporate bond report

[.EU] European stock market report

[.L] UK stock market report

[.N] Wall Street report

Guides:

For prices or rates, double click on: <EUROBONDS>

For credit ratings, double click on: <RRS0001>

For credit derivatives, double click on <CDSINDEX>

For top corporate bond issuers, double click on <0#TOPISSUER> ($1=.5136 Pound)

Keywords: MARKETS BONDS EUROCORP

EURO CORP-Credit spreads unchanged after Barclays results

Reuters: [2008-05-15 08:57:00]

LONDON, May 15 (Reuters) - European credit spreads were little changed in early trading on Thursday after British bank Barclays <BARC.L> reported a fall in first-quarter profit following a 1 billion pound ($1.95 billion) writedown.

By 0640 GMT, the Markit investment-grade iTraxx Europe index <ITRAC5EA=GFI> was unchanged from late on Wednesday at 72 basis points, according to Markit data.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 1 basis point tighter at 427 basis points.

"Barclays isn't a positive thing, but it's not big enough to sway the sentiment at the moment," a trader said. "The market's used to bad news coming out from financials."

The cost of insuring Barclays' debt against default was also little changed, another trader said. Five-year credit default swaps on Barclays were at 66.5 basis points, having traded down at 65 basis points earlier. (Reporting by Maya Thatcher, editing by Will Waterman)

((maya.thatcher@reuters.com; +44 207 542 9202; Reuters Messaging: maya.thatcher.reuters.com@reuters.net)) ($1=.5136 Pound)

Keywords: MARKETS BONDS EUROCORP

EURO CORP-Bond sales lift sentiment; spreads tighten

Reuters: [2008-05-14 18:05:00]

By Maya Thatcher

LONDON, May 14 (Reuters) - A wave of bond issuance kept the credit market busy on Wednesday, as issuers took advantage of tightened credit spreads in Europe following a rise in equities and softer-than-expected U.S. inflation data.

"It's very busy on the primary side, and the market is buoyant -- equities are rallying, credit coming back, life is good, the sun is shining in London," a trader said.

"The primary market is performing well, so there's this good mood in the market," the trader said.

By 1537 GMT, the Markit investment-grade iTraxx Europe index <ITRAC5EA=GFI> was at 71.75 basis points, according to Markit data, 2.25 basis points tighter versus late on Tuesday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 13.5 basis points tighter at 426.5 basis points.

"The market feels better because equities are doing all right, so across the board there's some tightening momentum," a second London-based trader said.

The FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.59 percent. Across the Atlantic, the Dow Jones industrial average <.DJI> and the Nasdaq Composite Index <.IXIC> climbed nearly 1 percent.

FEELGOOD FACTOR

Heavy activity in bond issuance gave markets a feelgood factor, with new deals from France Telecom <FTE.PA> automaker Daimler <DAIGn.DE> and consumer goods maker Unilever <ULVR.L>.

France Telecom sold both parts of its dual-tranche euro bond at the tight end of guidance, suggesting good demand.

The six-year, 750 million euro ($1.16 billion) tranche priced at mid-swaps plus 90 basis points. Guidance had been set at around 95 basis points over mid-swaps before being refined to 90-92 basis points over mid-swaps.

Guidance for the 10-year, 1.25 billion euro tranche was also cut ahead of the bond being sold.

The bond priced at mid-swaps plus 110 basis points. This is down from earlier indications of around 115 basis points over mid-swaps, and a subsequent refinement to 110-112 basis points.

Five-year credit default swaps on France Telecom, Europe's third-largest telecoms operator by market value, were slightly narrower on the bond, tightening 2.5 basis points to 78 basis points, according to Markit data.

German automaker Daimler priced a four-year, fixed-rate euro benchmark bond at mid-swaps plus 65 basis points, an official at one of the banks managing the sale said.

BNP Paribas, HSBC and UniCredit were joint lead managers on the bond sale.

Unilever, which makes Dove soap, Sunsilk shampoo and Knorr soups, tapped the primary market by selling a 750 million euro, five-year bond at 48 basis points over mid-swaps.

(Reporting by Maya Thatcher; editing by David Hulmes) ((maya.thatcher@reuters.com; +44 207 542 9202; Reuters Messaging: maya.thatcher.reuters.com@reuters.net))

* Reuters clients can view related news by double clicking on:

[EUB] All Eurobond news

[DBT] Debt reports

[EUB-ISU] New debt issues

[IGD] Investment-grade bonds

[HYD] High-yield bonds

[ABS] Asset-backed securities

[CDV] Credit derivatives news

[AAA] Credit ratings news

[TOP/DBT] Top fixed income news

[TOP/CREDIT] Top credit news

Other market reports:

[GVD/EUR] Euro government debt report

[US/] U.S. Treasury market report

[USC/] U.S. corporate bond report

[.EU] European stock market report

[.L] UK stock market report

[.N] Wall Street report

Guides:

For prices or rates, double click on: <EUROBONDS>

For credit ratings, double click on: <RRS0001>

For credit derivatives, double click on <CDSINDEX>

For top corporate bond issuers, double click on <0#TOPISSUER> ($1=.6467 Euro)

Keywords: MARKETS BONDS EUROCORP

EURO CORP-Spreads tighter, corporate issuance continues

Reuters: [2008-05-14 10:39:00]

By Richard Barley

LONDON, May 14 (Reuters) - European credit spreads tightened early on Wednesday as European equity markets gained and new bond sales gathered pace, though traders and investors were nervously eyeing the release of U.S. inflation data later in the session.

By 0815 GMT, the investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 74 basis points, according to Markit data, 1 basis point tighter than late on Tuesday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 5 basis points tighter at 435 basis points.

Credit spreads have been supported this week by a growing feeling that the worst of the financial crisis may have passed, as well as continuing signs of good demand for new bond sales. Luxury carmaker BMW <BMWG.DE> racked up orders of 4 billion euros on Tuesday for a 1.75 billion euro bond sale.

"It looks like we're seeing some stability between 70 and 80 (basis points on iTraxx Europe)," said a trader, noting that the market was welcoming this after some extreme spread moves in recent months. "We have been volatile for nearly a year now."

The tightening came even amid renewed pressure on the U.S. monoline insurers, which have guaranteed billions of dollars worth of structured finance. Moody's Investors Service said on Tuesday that losses for residential mortgage debt were worse than it expected and may hurt the capitalisation levels of MBIA Inc <MBI.N> and Ambac Financial Group Inc. <ABK.N>.

Following surprisingly high inflation reported in the UK on Tuesday, too, there are some nerves around the release of U.S. consumer price data later on Wednesday, analysts said.

CORPORATE ISSUANCE CONTINUES

France Telecom <FTE.PA> on Wednesday joined the growing list of corporate borrowers to have tapped the market in recent weeks, unveiling plans for a two-part benchmark bond.

The sale will be split into six-year and 10-year tranches, an official at one of the banks managing the sale said.

The news pushed spreads on telecoms credit default swaps around 1 basis point wider, the trader said.

Also in the market is carmaker Daimler <DAIGn.DE>, with plans for a four-year euro benchmark bond, a source familiar with the sale said.

Meanwhile, continuing a trend for use of alternatives to the public bond markets, mobile phone group Vodafone Group Plc <VOD.L> hired banks for a German Schuldschein private placement.

In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 112 basis points more than similarly dated government bonds, 0.5 basis points more on the day.

In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz <EU2YT=RR> was 3.879 percent, 5.6 basis points more on the day. The 10-year Bund <EU10YT=RR> yielded 4.148 percent, 5.4 basis points more.

The 10-year euro swap rate <EURAB6L10Y=> was 4.577 percent. (Reporting by Richard Barley, editing by Will Waterman) ((richard.barley@reuters.com; +44 20 7542 7770; Reuters Messaging: richard.barley.reuters.com@reuters.net))

* Reuters clients can view related news by double clicking on:

[EUB] All Eurobond news

[DBT] Debt reports

[EUB-ISU] New debt issues

[IGD] Investment-grade bonds

[HYD] High-yield bonds

[ABS] Asset-backed securities

[CDV] Credit derivatives news

[AAA] Credit ratings news

[TOP/DBT] Top fixed income news

[TOP/CREDIT] Top credit news

Other market reports:

[GVD/EUR] Euro government debt report

[US/] U.S. Treasury market report

[USC/] U.S. corporate bond report

[.EU] European stock market report

[.L] UK stock market report

[.N] Wall Street report

Guides:

For prices or rates, double click on: <EUROBONDS>

For credit ratings, double click on: <RRS0001>

For credit derivatives, double click on <CDSINDEX>

For top corporate bond issuers, double click on <0#TOPISSUER>

Keywords: MARKETS BONDS EUROCORP