Steelmaker ArcelorMittal was a conspicuous outperformer in a day lacking market-moving catalysts.

ArcelorMittal's spreads tightened 40bps to 335bps after it announced a €3.5 billion combined offering of common stock and mandatory convertible subordinated notes. The proceeds will be used to cut debt, and the company is aiming to reduce net debt to €17 billion by the end of June 2013 (it stood at €22 billion year-end 2012).

The European steel firm has also made asset disposals, cut capital expenditure and reduced its payout ratio in a concerted effort to improve its credit standing. Today's announcement puts it on schedule to meet its debt target and the considerable rally in the company's spreads suggests the markets appear to be more comfortable with this credit.

Arcelor was downgraded to junk last year, but the risk of a potential covenant breach this year - a major concern of the market - is now diminished. The steelmaker's spreads are now at their tightest level since August 2011.

In some ways Arcelor is bucking the recent trend towards shareholder-friendly actions. High-grade companies have been issuing debt to buy back shares or issue special dividends, taking advantage of low yields and the high demand of good quality bonds. Arcelor's experience shows that firms with sky-high spreads still have to protect their balance sheets, no matter how easy it is to place debt.

Apart from ArcelorMittal, there was little to shout about in the credit market. Alcoa's better than expected sales figures and positive outlook gave a boost to spreads at the open. But there was little movement in single names and by the close the Markit iTraxx Europe was 0.5bps wider at 103bps.

In the sovereign world, Portugal was a notable underperformer, its spreads widening by 20bps to 405bps. It wasn't surprising that it retreated - the sovereign had rallied by 50bps since 2012 year-end.

However, Ireland's debt issue yesterday may have triggered rumours that Portugal was planning to follow suit and return to the capital markets. There are no concrete signs that it is ready for this - Portugal is in a far different state than Ireland.

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