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EUR CDS Flow - Tighter single names as Crossover firms
Informa Global Markets - Bondwatch Morning Insight (Europe) (February 2, 2007)

A general firm tone was heard in CDS markets as the iTraxx Crossover index moved 7bp D/D tighter to 195.5/198.5.

The Industrial sector saw low flow with 5Y CDS on UPM-Kymmene remaining stable at 40/44 after it announced a Q4 net income increase to EUR 195mln, which was ahead of expectations, from a EUR 77mln loss in Q4 last year. EADS announced it had won a contract from Germany"s Defence Ministry to develop the Euro Hawk unmanned aerial vehicle worth USD 559mln. 5Y CDS in EADS moved 1bp firmer to 19/21. 5Y CDS on pharmaceutical concern AstraZeneca was unchanged at 4/9 as the company posted Q4 operating profit of USD 2bln, which marks an increase of 22% Y/Y or 24% at constant exchange rates. Contacts said they had seen no trade in AstraZeneca but trade was noted in Continental at 44 in an unchanged market of 47/49.

In the TMT sector 5Y CDS on BSkyB moved 1bp tighter to 25/28 after Reuters reported a spokesman for the company had said that BSkyB has ruled out a bid for fellow broadband operator Tiscali and it was confident in the organic growth of its broadband business. France Telecom posted a 2.6% Y/Y fall in FY EBITDA to EUR 18bln, which was broadly in line with expectations and did not alter the 5Y CDS level from 23/26. 5Y CDS was also steady at 25/28 on Vodafone after India"s Hinduja Group said that it is still interested in Hutchinson Essar and that it will begin due diligence on the company on 05-Feb.

Crossover names saw some movement with 5Y CDS in Rhodia coming in 5bp D/D tighter to 133/138. 5Y CDS on Corus moved tighter to 180/190. S&P said late on Wednesday that it has kept its long-term BB rating on Corus at CreditWatch with developing implications following the completion of the auction process citing ongoing uncertainty with regard to financing of the deal with Tata. Elsewhere, 5Y CDS on TUI remained at 210/220 after the Frankfurter Allgemeine Zeitung reported it may post a EUR 800-900mln loss in 2006. 5Y CDS on Ahold was also flat at 66/69 after it announced that Q4 net sales fell 3% Y/Y to EUR 10.4bln, which was slightly below expectations.



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