Halister News

(Bloomberg) -- Germany March advance PMI manufacturing est. 50.8 vs prev 50.5.

• Germany March advance PMI services est. 55.0 vs prev 55.3
• Germany March advance PMI composite est. 54.1 vs prev 54.1

(Bloomberg) -- DSTA to auction 0.5% 07/2026 DSL for EU4b-6b, books open at 10am CET. Analysts are optimistic on the sale given the near-term supply outlook for Netherlands, recent ECB easing announcements, curve valuations vs peers.

• Rabobank (Richard McGuire)
  • Fundamental backdrop supportive, given latest ECB measures should push hunt for yield; Dutch 5s10s curve is ~20bps steeper than Germany
  • Near-term supply outlook is supportive, provides an argument for curve flattening, also switching along the curve into this new issue
  • DSTA’s aim of extending the average maturity of portfolio to 5.5Y as of the end of 2016 (vs. 5.0 at the end of last year), do not expect this issue to be swapped

• HSBC (Wilson Chin)
  • New Dutch benchmark would trade at concession of ~3bps vs old 10Y; healthy domestic growth, lower 2016 is broadly positive for DSLs
  • April sees faster pace of QE purchases, should be constructive for euro-zone sovereigns; given strong fundamentals of the Dutch state, expect outperformance of new 10Y vs swaps, also vs bunds

• SocGen (Marc-Henri Thoumin)
  • Limited value in RV, but sustained demand for core duration will help; 10Y DSLs have seen marginal cheapening vs swaps over the past week
  • Latest ECB package has revived demand for core duration, expect this trend to continue over coming weeks, may help auction demand
  • 2bps-3bps pickup in roll against 07/2025 DSL is slightly above prior rolls, will compensate for modest curve concession

• ING (Martin van Vliet)
  • New ECB QE program represents favorable backdrop to auction; QE set to buy more bonds than govt plans to sell in 2016
  • Given this backdrop, target 10Y DSL/bund spread below 15bps (vs 19bps currently); 5s10s DSL curve looks steep vs France

• ABN AMRO (Kim Liu)
  • 2016 Dutch gross, net bond supply dynamics are favorable; cash flow dynamics also supportive due to extra PSPP buying in April to June
  • New DSL offers value vs other DSLs, bunds, OATs and in a fly vs Finland and Austria

• UBS (Nishay Patel)
  • 10Y Netherlands is toward rich end of 1Y range on 5s10s30s fly; close to cheap end of 6-month range vs France, 5s10s box spread vs France also at 6-month wides

(Bloomberg) -- Corporate bond spreads see early widening pressure, amid reports of explosions at Brussels airport. Technicals have remained firm in previous sessions as a decline in liquidity is seen into Easter holidays, despite persistent macroeconomic concerns and price volatility among miners and commodity producers, Bloomberg strategist Simon Ballard writes.

• Reports of Brussels explosions fueling defensive bias this morning; synthetic indexes first to react wider, initial market liquidity probably very poor
  • Elsewhere, beware the ability of political uncertainty to weaken investor sentiment, amid U.K. EU membership debate, Trump’s protectionist rhetoric overnight
• ECB CSPP seen as medium-term pillar of support for EUR corp credit valuations, although program details yet to be released
  • This should underpin buy-and-hold nature of asset class, but some investors may see value in hedging long credit risk with short equity exposure due to specter of renewed macro-fueled equity mkt volatility
• Credit market volatility remains elevated as highlighted by Risk Appetite model
• CDX IG currently -0.3bps at 77.53 in overnight session; iTraxx Asia Ex Japan IG is currently -0.7bps at 149.64

NEWS

• Corporate News
• Wolseley Sees FY Trading Profit In Line With Consensus Estimates
• Airbus in Talks With Bharat Forge, Mahindra to Forge Parts: ET
• Jimmy Choo 2015 Adj. Ebitda In Line, Sees Growing Faster Vs Mkt

• Financial News
• HSBC Said to Take Loss on Irish Oil Minnow Loans as Pain Spreads
• Deutsche Bank at Risk of Moody’s Cut on Struggle to Overhaul
• IG Group 3Q Rev Rises 18% to Record, Began 4Q In Strong Position

• Credit Rating News
• Woodside’s Baa1 Rating Confirmed With Negative Outlook: Moody’s
• S&P Affirms S-Oil Rating At ’BBB’; Outlook Stable
• Low Oil Prices to Slow Growth in GCC Countries in 2016: Moody’s
• S&P Affirms New Zealand Credit Ratings, Outlook Remains Stable

• Other News
• Europe’s Junk Market Faces New Crisis If U.K. Votes for ‘Brexit’
• BlackRock Says There Won’t Be a U.S. Recession, Cut Treasuries

ANALYST VIEWS

• ECB will probably aim for up to EU2b a month in purchases, which would amount to much noise and not a whole lot of action in reality, but enough to frustrate investors and still distort the market in favor of lower spreads: creditmarketdaily.com

NEW ISSUES

• HeidelbergCement EU1b 7Y bonds at MS +205
• 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.
• NOTE: EU CREDIT DAILY will not be published from March 24 to April 8. Publication will resume April 11.