Credit derivatives traders in London today said the cost of debt protection for the rest of the German banking sector was being drawn wider as sellers of protection pulled back offers.
Five-year senior protection for Commerzbank traded today at 155/195bp, up 10bp from yesterday. Protection for Dresdner Bank was 5bp wider at 75/85bp; while Deutsche Bank protection costs were stretched 2-3bp wider to 54/60bp.
Elsewhere in Europe, other sectors continued to tighten or remain unchanged as the credit markets gained buoyancy from more robust equity markets. The cost of protection for European telecoms has notably contracted over the week. Five-year credit protection for France Telecom was trading at 405bp-mid, in 40bp for the week. Credit default swaps for British Telecom, KPN, Deutsche Telekom and Vodafone were all about 10-20bp tighter this week.
Credit default swaps trading volumes in Europe remained thin, and traders warned that with more possible downward earnings releases and equity volatility, spreads could begin to widen again in the next couple of weeks.