EU CREDIT DAILY: Braced for Weakness; Aviva Resilient, NBAD/FGB
(Bloomberg) -- Political turmoil and economic uncertainty likely to drive continued risk mkt weakness early this week as fallout from Brexit referendum gains momentum, Bloomberg strategist Simon Ballard writes.
- Turmoil may undermine appeal of GBP risk assets, reversing small stability seen Friday
- GBP cash bonds (less liquid) may outperform synthetics (more liquid)
- Cyclicals to remain under pressure (tech, energy, consumer, Financials); utlities, healthcare, telecoms may outperform
- Decompression of GBP and EUR quality curves could be key theme as investors implement defensive investment strategies
- Volatility and uncertainty likely to keep many investors sidelined; damp corp new issuance
- Investors may now favor USD credit risk over GBP, EUR risk; better transparency, perceived capital preservation
- Risk Appetite Model: shades of 2010 as Brexit triggers sharp spike in volatility
- CDX IG closed +0.6bps at 87.03 in overnight session; iTraxx Asia Ex Japan IG currently +5.8bps at 150.02
NEWS
- Corporate News
- Scentre Group Redeems A$0.6b of A$1.2b Property Linked Notes
- Tatts Sees Profit at Low End of Ests Amid Tight Wagering Margins
- Financial News
- Aviva Says Capital Position Is Resilient to Market Stress
- HSBC Sees NBAD, FGB Merger Synergies of 11.4 Billion Dirhams
- SNB Says Negative Rates, Interventions Form Basic Policy: Op-Ed
- Investment Banks Are Hit by Brexit Era of Turmoil, Few Deals
- Credit Rating News
- S&PGRBulletin: QBE Well Placed To Manage EU Instability
- Other News
- Osborne says U.K. economy will weather Brexit
- Pimco, JPMorgan See Asian Bond Stability Appealing After Brexit
- U.K. Should Take Time to Reflect, EU Parliament’s Lamberts Says
- Investors Map Post-Brexit Strategies Amid Global Market Upheaval
- Puerto Rico Default Matters Little With Reputation in Ruin
ANALYST VIEWS
- We expect stability (this week) then some recovery and correction from this predictable and horrible overreaction - and then excitement and anticipation as we all get back to embracing our new future and making this whole “Brexit thing” work: creditmarketdaily.com
NEW ISSUES
- No Syndicated New Issuance Friday
- 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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