Telco bond issues spark flurry of activity in credit markets

The €5.5 billion new bond issue by France Telecom on Wednesday followed by a smaller €500 million issue by Deutsche Telekom, yesterday, sparked a flurry of activity in the European credit markets.

While cash trading dominated activity, telco credit derivatives trading was brisk, with clients shorting risk as they bought protection. The five-year credit protection cost for France Telecom widened about 28bp since the bond issue to 293/303bp at the end of trading today. Deutsche Telecom credit default swaps ended the day at 237/247bp, around 25bp wider since its bond issue.

But traders noted there was little trading in credit default swaps compared with volumes in bonds. Investors rushed to

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