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EUR CDS Flow - Market predictably quiet with US holiday
Informa Global Markets - Bondwatch Morning Insight (Europe) (November 24, 2006)

With Japan and US out on Thursday volumes were destined to be low, but a handful of movers in the CDS market kept traders occupied.

Contacts reported a very quiet day in the Crossover sector with only 5Y CDS on Germany"s Unity Media providing any excitement, moving 20bps tighter D/D to 550/558 on the release of Q3 figures that matched market expectations. A contact stated that the market paid the most attention to Unity Media"s subscription figures, which were up 5.2% to 5.596mln as at 30-Sep in its core cable operations. The other movement in the sector came from Finnish paper maker M-real which announced it was issuing a new EUR 400mln FRN. 5Y CDS on the Finnish company moved 20bp wider immediately after the announcement with trade at 340, but subsequently moved back to 330/340 (+10 D/D).

In the Industrial sector 5Y CDS on British airports operator BAA widened 2bp on Thursday to 34/37 after the Civil Aviation Authority"s announcement that its current assessment of BAA was leading it towards reducing the operator"s cost of capital allowed. The CAA warned that this does not necessarily mean it will impose price caps on the charges that BAA levies on airlines. German pharmaceuticals company Bayer announced it has agreed to sell its HC Starck unit for EUR 1.2bln including EUR 700mln in cash enabling it to cut its net debt by EUR 1bln. 5Y CDS on the company remained at 23/26 (-). Elsewhere German cement maker HeidelbergCement announced it was to purchase 75% of Georgian concern Saqcementi. Heidelberg"s 5Y CDS was at 38/43 (-).

Elsewhere, following on from the sale on Wednesday of its flavours business ICI"s 5Y CDS moved back wider today to 31/34 (+1bp). Market contacts reported that this move was due to ICI being viewed as potentially looking for acquisitions now that it is cash rich.

In the Energy sector 5Y CDS on Spanish utility Union Fenosa remained unchanged at 21/23 after it released positive guidance during an investor/strategy day. The company stated that EBIT is expected at EUR 1.278bln for 2006, which is above the EUR 1.15bln target it set itself for 2007. Both Iberdrola"s and Scottish Power"s 5Y CDS were unmoved at 18/20 and 28/33 respectively after reports in The Times newspaper that Iberdrola could make a bid for its Scottish counterpart by the end of next week.

In Airlines the 5Y CDS on Air France widened to 53/58 (+6bp) on the news that it is in exploratory talks with Alitalia at the Italian airline"s request.

In TMT the 5Y CDS on Telecom Italia was unchanged at 63/66, with a trade seen at 64, showing no further movement after Wednesday"s announcement that private equity group Blackstone was reported to be interested in buying stakes in the company.

Note that the primary bond market had its fair share of news today with bond issue on Pernod Ricard received extremely well. The EUR 850mln 2-part priced with a EUR 300mln FRN due 06 June 2011 paying a coupon of 3mE +50bp, whilst the EUR 550mln 4.625% due 06 December 2013 gave mid-swaps +80bp. French aerospace firm Thales saw its 5Y CDS remain at 16/20 (-) after its new benchmark EUR-denominated 3-year FRN priced in-line with guidance.



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