* Primary bond market shows further strength
* Improved sentiment on sovereign debt supports rally
By Alex Chambers
LONDON, June 17 (Reuters) - European credit spreads tightened and there was a further strengthening in primary market activity underpinned by the successful Spanish bond auction and a sharp relief rally in BP.
In the new issue bond market two banks, Deutsche and Standard Chartered, launched deals to raise lower tier 2 capital, while America Movil brought a multi-currency issue.
The macro picture was helped by the news from Spain and the implication this has for sovereign debt concerns, and banks rallied.
The Markit iTraxx Western European sovereign index tightened by 7.5 basis points to 138 basis points, while the iTraxx senior financials index tightened by 8 basis points to 161 basis points, Markit said.
Five-year CDS on Spain was 18 basis points tighter at 240 basis points.
Following the agreement BP made with the U.S. government, its five-year credit default swap rallied by 145 basis points moving to 400 basis points according to Markit.
This is still a level corresponding to a sub investment grade company.
By 1120 GMT, the investment-grade Markit iTraxx Europe index was at 124 basis points, according to data from Markit. That is 2.5 basis points tighter versus late on Wednesday, according to data from BGC Partners.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 552 basis points, 9 basis points tighter. (Reporting by Alex Chambers; Editing by Jon Loades-Carter)