LONDON, Aug 16 (Reuters) - Trading volumes increased as nervy investors tentatively followed bargain hunters back into the international bond markets on Friday while watching the further unravelling of the Vivendi saga.
The Reuters CorpTop index showed the average spread between euro-denominated corporate and similarly dated government bonds fell by two basis points from Thursday's close to 154.5 over -- having risen to 159 over prior to the market opening on Friday.
"Volumes still are not good at all, even for August," said a trader at a German bank in London. "But they are up on the last week or so and there seems to be a feeling that there are solid bargains to pick up out there."
The result has been the best day for at least a month for bonds from automakers and European telecoms firms, traders said. Auto bond yield spreads over government bonds fell by between six and eight basis points on average with some credits. Telecoms bonds outperformed autos as yields fell between eight and 10 basis points on average.
Meanwhile, French multi-utility Vivendi Environnement's attempts to extricate itself from its floundering former parent, Vivendi Universal , rumbled on.
Environnement is attempting to get bondholders to scrap a cross default clause in its 1.4 billion euro, 1.5 percent euro convertible bond due 2005. The clause states that bondholders must be paid out in full if Universal defaults on its debt.
Environnement bondholders have been given until Tuesday to agree or oppose the deal but some are angry at the speed with which the proposal has been put forward. Hedge funds in particular feel that the 75 basis points in extra coupon payments Environnement is offering in return for scrapping the cluase may not match the amount they could get if Universal defaults and they are paid out, bondholders said.
Bondholders wishing to oppose the proposal must meet in Paris on Tuesday, although there is a further meeting scheduled for Tuesday 27 August should it be needed.
MARCONI STROLLS ON, RESULTS HEAVY WEEK AHEAD
Elsewhere, bonds from stricken British telephone hardware maker Marconi were unmoved at 22 percent of face value, despite the fact that a definite plan for rebuilding the firm's crippled balance sheet has yet to emerge.
Market rumours suggested that the plan would be unveiled on Friday but it has not materialised and Marconi's shares plunged 23.6 percent on Friday to 2.61 pence from 3.5 pence.
Marconi said on Friday that it is still in talks with its lenders -- while the market rumour mill put back its expectations of an announcement to early next week, traders said.
Finally, investors are braced for a slew of corporate results next week. On Tuesday, Dutch telecoms operator KPN reports, to be followed by Deutsche Telekom on Wednesday.
Insurance giant AXA will issue first-half results on Wednesday which investors hope will buoy up the struggling financials sector and engineer Thyssen Krupp reports on Thursday.