KPN leads single name focus

There was plenty of single name news to keep credit markets occupied on Thursday, filling the gap left by a lack of activity on the macro front.

Dutch telecoms carrier KPN was among the strongest performers in Europe amid reports that US firm AT&T is considering acquisitions in Europe, with KPN one of the more likely targets. The reports didn't cite any sources, so the accuracy of the news is questionable.

Nonetheless, KPN's spreads tightened 13bps to 160bps and AT&T's CDS widened 3bps to 86bps. The convergence in spreads was hardly dramatic, suggesting the markets will take more convincing that a deal is likely.

But KPN - partly owned by Carlos Slim's America Movil - is one of the weakest telecoms names in Europe and has underperformed its European peers by some margin in recent years. It would be no surprise to see US firms acquiring European assets given the current low valuations.

British retail is another sector struggling under the weight of increased competition. Several well-known firms - Comet, HMV, Blockbuster, to name a few - have recently gone into administration. However, two high street retailers provided some welcome good news today by reporting better than expected results.

Electronics chain Dixons posted strong sales over the Christmas period, citing high sales of tablet computers as the main driver. Home Retail Group (HRG), the owner of Argos, also said its sales had been boosted by tablets.

Dixons' CDS tightened 26bps to 400bps, making it one of the strongest performers in the high-yield space. HRG has little public debt outstanding and doesn't trade in the CDS market.

The positive single name news - albeit with a few exceptions, such as Rio Tinto - helped the broader market to post a modest rally. The Markit iTraxx Europe was about 0.5bps tighter at 103.5bps.

Over in the US, sentiment was dominated for a second consecutive day by banks. Both Citigroup and Bank of America posted results and they weren't particularly impressive. Citi's earnings missed estimates by a wide margin, due to a more conservative approach to releasing loan loss provisions.

Dell was among the worst performers amid news that private equity firm Silver Lake is close to securing funding for a takeover. Dell's CDS widened 20bps to 400bps today, and has now given up more than 200bps since the LBO rumour first emerged last week.

Download full article