Dutch utility bonds led a decline in the European corporate bond markets on Thursday on fears deregulation in the Netherlands could weaken their finances, while autos and telecoms slid ahead of economic data.
"It's been a pretty quiet session with most things slipping a couple of basis points. The real movers are the Dutch utilities, which have widened a lot compared to the rest of the market," said a bond trader in London.
Bonds of Dutch utilities Essent and Eneco fell in value after credit rating agency Standard & Poor's revised its outlook on the groups to negative from stable following the Dutch government's announcement on Wednesday that it wanted to deregulate the market.
Essent, the Netherlands' largest energy group, saw its 4.5 percent euro bond due 2013 widen around 10 basis points to be bid at 89 basis points over government bonds, traders said.
Bonds issued by Eneco, the third largest energy supplier and distributor, were also about 10 basis points wider with the 4.125 percent 2010 euro bond bid at 93 basis points over government debt.
The Dutch Economic Affairs Ministry wants local power firms to split off their distribution grids from their generating and marketing activities as part of an overhaul of the sector.
"If the plans go ahead, the impact of the proposed restructuring on the credit quality of each of the companies could be significant," said S&P infrastructure finance credit analyst Karl Nietvelt.
S&P affirmed both companies' as well as fellow Dutch energy group NUON's A+ long-term and A-1 short-term corporate credit ratings. NUON now also has a negative outlook from S&P.
The FTSE Euro Corporate Bond Index, which shows how much more investment-grade corporate bonds in euros yield versus government debt, hovered between 56.8 basis points and 61.6 basis points and closed unchanged at 59.2 basis points.
"We tried to go better in the morning, but now we are one weaker on the day. It's dead ahead of the US auto sales numbers (later on Thursday) and US payrolls," said one auto bond trader in London.
General Motors' 8.375 percent euro bond due July 2033 was bid at 244 basis points over German Bunds at 1440 GMT, he said.
Telecoms bonds widened around one basis point, with traders blaming weaker than expected US Midwest business expansion data on Wednesday. But the key data this week is US employment figures due on Friday.