European corporate credit default swap spreads edged tighter on Tuesday, but remained confined to narrow ranges, with the flood of new issues in the primary market still the main theme. The primary market was awash with new bond issues again as companies and banks race to raise cash while conditions remain favourable.
"A lot of the market's focus is on all the new deals." said Maureen Schuller, senior credit strategist at ING. "We have seen issuers from southern Europe, less-frequent issuers and lower investment-grade-rated and unrated issuers, who are taking the opportunity to bring new bonds at the current spread levels."
For example, Italian cement maker Italcementi, rated Baa2 by Moody's Investors Service and BBB- by Standard & Poor's, is selling a 750 million euro 10-year bond. A stream of bank issues have also emerged, including ING, Credit Agricole, LF Hypotek and Eurohypo Luxembourg. By 1146 GMT, the investment-grade Markit iTraxx Europe index was at 75.5 basis points, according to data from Markit, 0.50 basis points tighter versus late on Monday.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 423 basis points, 2 basis points tighter. The final adjustments to the constituents that will make up the new Series 13 of the Markit iTraxx investment grade Europe CDS index and the iTraxx Crossover index are set to be completed later on Tuesday.
"Markit will conduct a number of conference calls before finalising the constituent lists for Series 13 of iTraxx indices," Barclays credit strategists said in a note. "The final lists will be published this evening, and trading commences on Monday 22 March."
Markit published a provisional list for Series 13 of the benchmark CDS indexes last week. The indexes roll over every six months when constituents can be replaced because of rating downgrades, defaults or changes in liquidity. The rollover is not expected to have a dramatic impact on CDS spreads in the Europe index as only two companies are set to leave and two to join, analysts said.
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