Bond Issuance Stalls as Credit Indexes Little Changed Before ECB

Corporate bond issuance slowed and credit derivative indexes were little changed as investors held fire before this week’s European Central Bank meeting.

The Markit iTraxx Europe index of credit-default swaps on 125 investment grade companies was little changed at 133 basis points at 10:29 a.m. in London. Origin Energy Ltd., Australia’s largest energy retailer, and French chemicals maker SPCM SA offered a total 750 million euros ($968 million) of bonds.

With signs Europe’s economy is worsening as its debt crisis remains unresolved, investors are looking to ECB President Mario Draghi for direction. The Frankfurt-based bank will keep its main refinancing rate unchanged at a record low 0.75 percent when it meets Oct. 4 and will reduce it by the end of the year, a Bloomberg poll of economists showed.

“More evidence on the political situation and updates on growth will be needed to deliver further action,” analysts at Newedge Group Ltd. in London wrote in a note.

Origin is selling 500 million euros of seven-year bonds while Andrezieux, France-based SPCM is offering notes due June 2020. The new issue market is slowing after $49 billion of deals were completed last month, the busiest since the euro crisis began.

The cost of insuring sovereign debt declined with the Markit iTraxx SovX Western Europe index of credit-default swaps on 14 governments dropping one basis point to 144. Swaps on Spain fell 7.5 basis points to 372.25, the lowest since Sept. 25, while Italy dropped eight to 340 basis points.

The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers fell two basis points to 198. The Markit iTraxx Crossover index of 50 mostly junk rated companies dropped 3.25 basis points to 556.

A basis point on a credit-default swap protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. 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.