The merged company is likely to keep its borrowing at a level that maintains its investment-grade rating, said Gary Jenkins, head of fixed income research at Evolution Securities. Five-year CDS on Cadbury tightened by around 24 basis points to 51 basis points, according to Markit data.
Elsewhere in the market, the focus was on results, including from eight companies in the S&P 500 index. Companies will have to start showing signs of revenue growth for the market to continue to have momentum, Deutsche Bank credit strategists said.
"All eyes will be on Citigroup's fourth-quarter result ahead of the US opening bell. As we saw last week with J.P. Morgan, the bar has been raised for financial earnings," they said. By 1232 GMT, the investment-grade Markit iTraxx Europe index was at 77.25 basis points, according to data from Markit. That is 2.50 basis points wider versus late on Monday, according to data from BGC Partners. The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 420 basis points, 3.25 basis points wider.