European credit spreads moved wider again on Wednesday as relentless worries about a widespread fallout from the US subprime market continued to unnerve investors. The iTraxx Crossover, viewed as a barometer for risk appetite, moved sharply higher by 8 basis points to 226 basis points by 0725 GMT following a weak performance overnight from global stocks.
"If stocks recover we could move tighter. Everything is being driven by the index," the trader said. Wednesday's agenda includes US durable goods data at 1230 GMT. A Reuters poll shows durable goods orders are expected to fall 1.0 percent in May from a 0.8 percent increase the previous month.
The US Federal Reserve's two-day rate-setting meeting starts, although rates are expected to stay on hold at 5.25 percent. In single name spreads, five-year credit default swaps in German TV broadcaster ProSieben moved five basis points wider to 165 basis points, a second trader said, after news it had bought rival SBS broadcasting for 3.3 billion euros.
ProSiebenSat.1 said the purchase would be financed entirely with new syndicated loans from a group of banks led by Bank of America, Calyon, Credit Suisse, HypoVereinsbank, J.P. Morgan, Lehman Brothers, Morgan Stanley and Royal Bank of Scotland.
The primary market has certainly borne some of the brunt of the credit sell-off with Arcelor Finance postponing a 2-part benchmark eurobond on Tuesday. But that doesn't necessarily mean that new deals will dry up completely.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 43.0 basis points more than similarly dated government bonds at 0740 GMT, 0.1 basis points lower on the day.
In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz was 4.415 percent, 3.3 basis points lower on the day. The 10-year Bund yielded 4.560 percent, 0.4 basis points down. The 10-year euro swap rate was 4.839 percent.
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