Bonds: Telecom Italia leads rally

30 Mar, 2004

Bonds of Telecom Italia, one of the biggest issuers of euro-denominated debt, led European corporates higher on Monday as rising equity markets stoked risk appetite.
Italy's biggest utility Enel plans to sell a 1.5 billion euro bond to institutional investors next month, the company's chief financial officer said on Monday.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 60.3 basis points more than similarly-dated government bonds at 1547 GMT, 1.3 basis points less on the day.
"We are seeing telecoms doing a lot better following on from stronger equities - people are probably starting to take a view ahead of the US jobs data this week," said one trader.
Telecom Italia bonds rose, with cash spreads outperforming credit protection, a trader said. Telecom Italia's 5.375 percent bond due 2019 was 10 basis points tighter at 145 basis points over government bonds.
The cost of credit protection on the company was around two basis points tighter, he said.
Elsewhere, autos rallied before key US sales data due on Thursday. General Motors' 8.375 percent euro bond due July 2033 was bid around eight basis points tighter at 247 basis points over German Bunds at around 1520 GMT.
European stocks rose to their highest level in more than a week on Monday as investors cheered Volkswagen's strong sales in China. Spreads on Volkswagen bonds were around two basis points tighter, a trader said.
The cost of insuring against a default by mining group Anglo American Plc fell as Russian metals giant Norilsk Nickel bought its 20 percent stake in gold miner Gold Fields for $1.16 billion. Anglo American said it would use the proceeds to pay off debt and finance capital expenditure.
Five-year default swaps on Anglo American fell during the session to 48 basis points from 51 basis points, meaning it costs 48,000 euros a year to insure 10 million euros of debt against default.
Investment-grade issuance remained subdued, aside from the promise of a new two-part bond from Enel, rated A+ by Standard & Poor's. High-yield issuance, however, continues apace.

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