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EUR CDS Flow - CDS spreads weaken; Boots volatile
Informa Global Markets - Bondwatch Morning Insight (Europe) (July 13, 2007)

There was a stronger tone in the CDS market on Thursday, with traders saying they saw bid lists for the first time in a number of days. Contact said that the market was a lot more liquid with participants feeling more comfortable with spreads at there current levels. However, traders warned that the tightening seen on Thursday may not last for long and expect the CDS market to continue to weaken. Contacts said that the single name moves were linked to participants trying to capture value compared to the performance of the iTraxx Crossover index, rather than any fundamental views on the companies themselves.

In the single names Q2 earnings season began to get underway with Alstom, Experian and Suedzucker all providing updates. 5Y CDS on Alstom was a touch tighter at 30/33 (-1bp D/D) after releasing a strong estimate beating Q1 trading update which showed orders in the quarter had reached EUR 7.6bln an increase of 62% Y/Y. Shares in Alstom gained 8.8% on Wednesday"s close, to its highest in level in over 4 years.

Elsewhere in the Industrial sector 5Y CDS on Roche was unchanged at 4.5/8 after Ventana rejected its USD 75 a share bid on Wednesday. Roche said that its offer was "full and fair" and was committed to bringing the companies together. The Crossover sector was relatively quiet with the main news being Basell"s decision not to increase its USD 25.25 per share offer for Huntsman Corp, which then agreed to be acquired by Apollo"s Hexion unit for USD 28 a share. Traders said that 5Y CDS on Basell tightened 30bp to 425/435. Elsewhere contacts said that speculation of a EUR 70 share bid for Cap Gemini from Infosys had caused shares to rise and CDS was 10bp tighter at 90/100, but this was in line with the sector tightening.

In the Consumer sector 5Y CDS on Suedzucker was weaker at 30/34 (+1bp D/D) after reporting a 58% Y/Y fall in Q1 operating profit to EUR 54mln alongside a 91% plunge in net income to EUR 5mln. Elsewhere, Experian said that Q1 total revenue-growth was 11% Y/Y and its 5Y CDS was unchanged at 60/63.



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