European credit spreads nudged tighter on Thursday, as thin headlines and sparse trading focused markets on marginal gains in European and US equities. By 1525 GMT, the Markit investment-grade iTraxx Europe index was at 78 basis points, according to Markit data, three basis points tighter versus late on Wednesday.
The iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was six basis points tighter at 455 basis points. "It's stocks that are driving everything today," a trader in London said. "A lot of people really are undecided as to where spreads will go, and are waiting for some clear guidance. We're heading off into the summer (lull) as well."
In single names, five-year credit default swaps on Nordic telephone company TeliaSonera were 3.5 basis points wider at 89 basis points, the trader said, as talk of a possible bid by France Telecom resurfaced. France Telecom has approached banks seeking to arrange a 10 billion euro ($15.59 billion) loan facility to finance an unspecified acquisition, sources said. France Telecom declined to comment.
CDS on France Telecom were little changed at 61 basis points. Among financials, the cost of insuring Royal Bank of Scotland's debt against default was little changed on speculation that the British bank's planned 12 billion pound ($23.7 billion) rights issue could be hitting snags.
RBS's five-year CDS was around 70 basis points, a second trader said. The trader added that RBS's subordinated cash bonds were also unchanged, but whilst other names were around 10 basis points tighter. RBS shares dipped over 5 percent. RBS declined to comment. "The equity's been reacting much worse than the credit," the trader said.
CDS of RWE were little changed at 49.5 basis points after talk that Permira, Blackstone and Warren Buffett were jointly bidding for the German utility. A financial source close to the matter denied the rumour soon after. Permira and RWE declined to comment.