JCDecaux SA (DEC), the world’s largest outdoor advertising company, made its debut in European debt markets as the cost of insuring corporate bonds against default jumped the most in 10 weeks.
JCDecaux sold 500 million euros ($678 million) of five-year notes in the only corporate deal marketed today. The Markit iTraxx Europe Index of credit-default swaps linked to 125 companies with investment-grade ratings increased five basis points to 116 at 1:10 p.m. in London, the highest this year.
Investors are seeking to hedge corporate debt holdings on speculation Europe’s sovereign debt crisis is set to erupt again. Spanish Premier Mariano Rajoy is facing opposition calls to resign amid contested reports about illegal payments and there’s concern there will be political turmoil in Italy as former premier Silvio Berlusconi gained in opinion polls before elections this month.
“Expect peripheral bond yields to remain under pressure in the days ahead, placing the euro-zone crisis firmly back in the driving seat,” Ishaq Siddiqi, a market strategist at ETX Capital in London, wrote in a note to investors.
Credit-default swaps linked to Spanish government debt jumped 11.5 basis points to 281, while contracts on Italy climbed 10 basis points to 260, both the highest this year, according to data compiled by Bloomberg.
Paris-based JCDecaux’s bonds were priced at 95 basis points more than the benchmark swap rate and the deal comes after the busiest January for European company debt sales since 2009. An official for the company didn’t respond to an e-mail and phone call seeking comment.
Redemptions from European bond funds in the week ended Jan. 30 were the third-highest since the start of 2012, data from Informa Plc (INF) subsidiary EPFR Global show.
Bonds of Banca Monte dei Paschi di Siena SpA, the Italian lender facing a criminal probe into money-losing derivative deals, fell for a sixth day. The lender’s 4.875 percent notes due 2014 dropped 0.23 cents on the euro to 98.1 euro cents, Bloomberg data show.
The European Investment Bank was also in the new issue market today, adding 250 million euros to its 2.75 percent bonds due 2025.
Millennium Offshore Services Superholdings LLC is meeting global investors before a planned $225 million sale of five-year notes that cannot be called for two years, people with knowledge of both deals said.
In credit derivatives markets, the Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly speculative-grade ratings added 15.5 basis points to 448, according to prices compiled by Bloomberg.
The Markit iTraxx Financial Index of swaps on 25 banks and insurers was up nine at 154.5, while the subordinated index added 12 to 265, the gauge’s highest level since Dec. 10.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.
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