
Credit Markets Update: Tyco curve inverts on CIT spin-off delay concerns
The cost of five-year credit protection on Tyco widened to 730bp/790bp today as the company’s credit default swaps curve inverted. Credit protection on two-year Tyco debt saw bids of more than 1,000bp with no offers. Five-year credit default swaps on CIT traded at 450bp/500bp.
The SEC launched a formal investigation into spending decisions made by Kozlowski on Tuesday. This followed the former chief executive’s decision to resign Monday, which caused Tyco’s five-year protection spreads wider to 590/650bp from 550bp-mid – the average trading level during the past month. Five-year credit protection on CIT widened about 25bp to 275bp/300bp also on Monday.
Spreads widened a further 140bp on Tyco and 175bp on CIT yesterday and today as the market reacted to the implications of the SEC investigations and the potential delayed spin-off, said John Piluso, a trader at GFInet in New York. “When a company is down, Wall Street will just come in and crush it,” he said.
In Europe the cost of protection on France Telecom widened 30bp during the past couple of days following the debt-laden French telco’s forced purchase of 103 million shares in mobile-phone subsidiary Orange from German utilities company E.On. The deal, priced at €950 million ($892.6m), poised further questions about France Telecom’s ability to reduce its debt, traders said. The cost of credit protection on five-year France Telecom widened to 390bp/420bp over Libor today, said credit derivatives traders in London.
E.On exercised an option to sell the shares to France Telecom following an agreement reached between the two companies entered into in November 2000.
Elsewhere in Europe credit default swap spreads on telecoms were generally tighter, as were autos. But traders in London today said that the markets saw quiet sessions with light flows this week.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
More on Structured products
Derivatives
Callable repack frenzy opens up new options market in Europe
Demand driven mainly by French life insurers looking for alternatives to low-yielding sovereign bonds
Receive this by email