EU CREDIT DAILY: Low-Yield Paradox; RWE Loss, Zurich Profit Drop
(Bloomberg) -- Evaporating yields across Europe creates a paradox for investors, forcing them further down the quality curve for investment returns even as rallying government debt reflects deteriorating macro conditions that may favor defensive strategies, Bloomberg strategist Simon Ballard writes.
- Credit still the asset class of choice for yield, but market sentiment is susceptible to swings in macro outlook
- Mixed Asian credit market overnight, damped by weak oil price following surprise increase in U.S. stockpiles
- Secondary credit market activity seasonally muted and may slow further next week around Aug. 15 Assumption Day holiday in some European countries, but primary market continues to tick over
- CDX IG closed -0.04bps at 72.10 in overnight session; iTraxx Asia Ex Japan IG currently +0.2bps at 114.58 and iTraxx Australia quoted +0.1bps at 103.93
NEWS
- Corporate News
- China Mobile Profit Beats Estimates on 4G Subscriber Gains
- Deutsche Telekom Earnings Increase 8.6% on U.S. Mobile Strength
- Coca-Cola HBC 1H Comparable Ebit Beats, Sees 2016 Sales Growth
- DFS Furniture Sees FY Results at Upper End of Expectations
- RWE 1H Trading, Gas Midstream Loss EU156m vs EU73m Profit
- TUI Cuts Sales Forecast to ‘Around 2%’ From ‘At Least 3%’
- Henkel Profit Beats as CEO Prepares for Step Up in U.S. Business
- Bang & Olufsen FY Revenue DKK2.63b, Adj. Net Loss DKK198m
- Thyssenkrupp 3Q Profit Falls 18 Percent, Still Beats Estimates
- Valeant Is Reported to Be in Criminal Probe Over Pharmacy
- Financial News
- Zurich Insurance Profit Falls on Restructuring, Catastrophes
- Old Mutual 1H Profit Rises as Separation Process Continues
- Aegon Swings to Second-Quarter Loss on Hedges, Sale of U.K. Unit
- Swiss Life 1H Shows Lower Premium Volume, Higher Net
- Credit Rating News
- Moody’s maintains its stable outlook on the Czech banking system
- Telstra Rtg Unffctd By Results, Revised Capex: S&PGR
- S&PGR Affirms Vietinbank ’BB-/B’ Ratings; Outlook Stable
- Other News
- White House Report Says Small Banks Healthy Under Dodd-Frank
- RBNZ Says Markets Missed Downside Risks to Rate Outlook in MPS
- Brexit Hits U.K. Housing as Property Sales Drop Most Since 2008
ANALYST VIEWS
- Liquidity remains scarce; summer months are traditionally volatile and in stressful times, investors often do what they have to rather than what the fundamental analysis suggests. Yet, we advise against chasing the market at this stage: RBC Europe
- Summer lull time means relatively minor factors have the potential to trigger a pronounced impact on valuations. We think that by and large though, beta should remain the driving factor in credit for short-term returns: Commerzbank
NEW ISSUES
- EIB 3% 9/2022 Tap EU300m MS -31
- Shell International Finance EU1.25b 8.5Y, EU1b 12Y
- Places for People GBP400m 10Y UKT +225
- Veritas EU240.3m 7.5% 2/2023 8.841% Secondary Placement
- European IG credit pipeline here and HY credit pipeline here
- Issuers exposed to S-T rollover and interest-rate reset risk here
- NOTE: Simon Ballard is a credit strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.
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