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EUR CDS Flow- Single names show less volatility than iTraxx
Informa Global Markets - Bondwatch Morning Insight (Europe) (March 2, 2007)

Although the focus remained on the iTraxx indices, there was plenty of credit specific news and trading in single names on Thursday. The Consumer sector hosted a number of the day's focal points including Marks & Spencer's flirtations with a possible approach for Sainsbury. After M&S CEO Stuart Rose expressed interest in Sainsbury late on Wednesday, the retailer"s board this morning issued a statement saying that it was not going to make a bid at this time. However, it did reserve the right to bid for Sainsbury. 5Y CDS on M&S was a touch wider at 34/38 (+3bp D/D) while that on Sainsbury was noted at 87/92 (-5.5).

Also in the sector, BAT posted a 7% Y/Y rise in FY profit from operations on a like-for-like basis and forecast that 2007 volume growth would be at the lower end of guidance. 5Y CDS was impervious to the announcements and remained flat at 21/25. Trade was noted in longer-dated protection on a number of tobacco names including 10Y CDS on BAT at 43, 7Y CDS on Imperial Tobacco at 42 and 10Y CDS on Gallaher at 19.

Against a background of sinking equities and the rising iTraxx indices, a collection of names stood out in the Auto sector. Market sentiment was cited as the cause for a tightening in 5Y CDS on DCX as the bid was hit at 39 and then 37. The contract appeared to hold firm at 37.5/40 (-1.5) during the PM as the iTraxx indices were rocketing north. 5Y CDS on Continental was also a touch firmer at 40/44 (-1) having been lifted at 43 while that on Valeo opened lower at 67/71 but was noted at the end of the day at 71/74 (+2).

Centre stage in the Energy sector was the struggle for Endesa as Enel emerged from the wings with the announcement that the Italian firm was going to take its holding in its Spanish rival to around 17% using derivative contracts. Meanwhile, E.ON said that it may accept less than half of Endesa even though its current offer requires acceptance of more than 50%. 5Y CDS on the three names held firm, however, with E.ON at 14/18, Endesa at 14/16 and Enel at 11/13.



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