Cable TV operators are hot property in Europe at the moment and it seems another major firm in the sector could be an acquisition target.

Vodafone is thought to be considering a takeover of Kabel Deutschland, Germany's largest cable provider, according to media reports. The UK-based company has been pursuing a convergence strategy for some time and its hand may have been forced by the recent acquisition of Virgin Media by Liberty Global.

It isn't the first time Vodafone has been linked with Kabel Deutschland - a possible takeover was mooted about two years ago, prior to the German firm's IPO. No deal materialised and it is difficult to determine how much credence can be placed in the latest reports.

Nevertheless, the reaction in the CDS market today suggests an acquisition may not be a far-fetched idea. Vodafone's spreads widened 4bps to 89bps, its widest level since July 2012.

The relatively modest daily move probably reflects that, even with a sizable premium, Vodafone should be able to finance the potential buyout fairly comfortably. The telecoms firm has a strong balance sheet and recently raised $6 billion in a US bond offering, the latter move perhaps helping to fuel the takeover speculation.

Kabel Deutschland, on the other hand, saw a far more dramatic change in its CDS. The company's spreads tightened a massive 96bps to 165bps, making it the highest-quality name in the Markit iTraxx Crossover after Havas.

The benefits of a combination for Kabel Deutschland bondholders are clear: they will gain from Vodafone's strong investment-grade balance sheet, assuming the UK firm takes on the acquired company's debt.

Kabel Deutschland has also been mentioned as a possible LBO candidate. There is little doubt that bondholders in the German firm would prefer Vodafone's interest.

Both credits are very liquid - they have Markit Liquidity Scores of '1' (the highest available). More volatility can be expected as headlines hit the news wires.

Elsewhere, the broader credit market was relatively strong, driven by a bounce back in Italian and Spanish names. A solid Italian government bond auction this morning was welcomed, despite the impending general election.

Lastly, the International Swaps and Derivatives Association ruled that a restructuring credit event had occurred on SNS Bank. This followed the Dutch bank's nationalisation and expropriation of its subordinated debt. There are a small amount of CDS outstanding on SNS, but ISDA will decide tomorrow whether auctions will be held.

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