Junk bonds in KPNQwest, the US-Dutch telecom venture, rose sharply amid further speculation that parent KPN is close to a merger with Belgacom.

Traders reported strong buying as KPNQwest's bonds rose in price from 69 cents in the dollar to 75 cents. Traders and investors hope that a merger between KPN and Belgacom will prevent KPN selling its 50% stake in the joint venture company and it seeks to reduce its debt.