The primary market also saw a burst of activity as Dutch chemicals group DSM and home improvements retailer Kingfisher set out plans for new deals.
Eircom default swaps built on Tuesday's gains and rallied further after the company confirmed it had received a preliminary approach that may lead to an offer for it.
Five-year default swaps were 15 basis points tighter on the day by 1540 GMT, at 90 basis points, a trader in London said. The price means it costs 90,000 euros a year to insure 10 million euros of the company's debt against default.
The trading indicated that market participants believe a bid is likely to come from an investment-grade rated trade buyer, which would boost Eircom's "junk" credit ratings.
"Our equity guys are suggesting that Swisscom's shareholders want the company to use its cash pile and do something like this," the trader said.
Swisscom declined to comment after Eircom's announcement.
Elsewhere, default swaps on Danish telecoms firm TDC had a volatile session but were largely unchanged by 1530 GMT, another trader said.
TDC on Wednesday reported forecast-beating third-quarter earnings and raised its guidance, but all eyes were on any hints regarding possible private equity bids for the company.
TDC shed little light on the subject, but further speculation swirled in the market that a rival telecoms firm could be interested in buying the company, saving it from a debt-heavy leveraged buyout.
Five-year default swaps got as tight as 265 basis points but were back at 290 basis points by 1530 GMT, another trader said.
The cost of insuring against a default by Deutsche Telekom edged down after the company ruled itself out of a counterbid for O2, the British mobile phone group that agreed to be acquired by Telefonica this week for 17.7 billion pounds.
Broadly, spreads were slightly tighter in other sectors, traders said, although there was light activity.
Auto bonds seemed to take the two-notch downgrade of General Motors late on Tuesday in their stride, with some pointing out that the bulk of trading in Europe is in General Motors Acceptance Corp debt.
GM's plan to sell a stake in GMAC to a highly rated financial institution have supported the finance arm's debt, as it is expected to regain investment-grade ratings.
The iTraxx Crossover index, used as a barometer of sentiment in the high-yield market, was holding just below the psychologically important 300 basis points barrier, although traders said the move was lacklustre.
In the primary market, after a barren spell, two corporate borrowers are lining up deals.
Dutch chemicals group DSM NV will sell a 300 million euro ($360 million) 10-year bond this week, priced to yield "mid-to-high 40s" basis points over swaps, a source familiar with the deal said on Wednesday.
The deal is set to conclude late on Thursday or on Friday morning, the source added.
Earlier, lead managers ABN Amro and Citigroup said DSM would sell a euro bond soon, subject to market conditions.
And Kingfisher, Europe's top home-improvements retailer, plans to sell a benchmark euro bond to refinance existing debt, making its first foray into European bond markets for more than two years.The bond will refinance a 300 million pound revolving credit facility agreed in July, a spokesman for Kingfisher said on Wednesday.