EU CREDIT DAILY: Air of Optimism; Orange, TI, VW, Goldman, Anglo
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By Simon Ballard (Bloomberg) -- Price action in corporate bonds hints at lingering caution and doubt over whether market strength will prove self-sustaining, even amid an air of optimism enveloping global credit markets as some investors perceive oversold levels, Bloomberg strategist Simon Ballard writes.
- Initial spread tightening yday was faded as session progressed, even though magnitude of equity gains may have supported expectations for sustained rally
- Secondary market volumes remain muted, although primary mkt capitalizing on more buoyant backdrop
- Draghi’s dovish comments may raise hopes of further stimulus at March ECB meeting, supporting risk appetite; some investors may see it as further distortion of asset prices, muddying banks’ liquidity and balance sheet positions
- Bank CoCo paper among strongest performing sectors in past 2 sessions, although still 20+ pts lower ytd generically; though nothing has changed fundamentally since last week, may still hold very subjective investor appeal
- On radar today: German ZEW, U.K. PPI & CPI, U.S. Empire Manufacturing
- Risk Appetite model spread dispersion declines at the cost of higher volatility
- CDX IG currently -0.02bps at 120.67 in overnight session; iTraxx Asia Ex Japan IG is currently -3.4bps at 164.85
NEWS
- Corporate News
- Orange Earnings Rise as Bouygues Telecom Deal Talks Prolonged
- EDF Cuts Dividend as It Sees Falling Profit After Beating Goals
- Air Liquide Profit Rises on Europe, Emerging Market Growth
- Telecom Italia to Speed Up Investments in Three-Year Plan
- HeidelbergCement Ups Italcementi Goal as Profit Rises
- Michelin Profit Rises 19% as Cost-Cutting Lifts Tire Margins
- VW Loses European Market Share to Fiat, GM in Wake of Scandal
- Financial News
- UOB Profit Barely Rises as Bad-Loan Costs Check Income Gains
- Santander’s Botin Doesn’t Rule Out Small Acquisitions
- Goldman Fund Manager Weighs Junk Return on Yield Magnetism
- Rating News
- Fitch Affirms New Zealand’s Major Banks; Outlooks Remain Stable
- Indonesia’s Revised Investment List a Credit Positive: Moody’s
- Anglo Cut to Junk by Moody’s as Metal Rout Hinders Debt Cuts
- Challenger Rtgs Unaffected By 1H 2016 Results: S&P
- Other News
- European Bank Nightmare Far From Over as Fines and Fintech Loom
- China Bad Loans Rise to Highest in a Decade as Economy Slows
- Yellen Heads for March Crossroads as Market Urges Policy Detour
ANALYST VIEWS
- Addition of riskier paper will depend on how equities react. If they have found a floor and can stay around these levels or better, corporate bonds may start to show some incremental recovery; would include higher beta risk, all the way down to the CoCo bond market eventually: creditmarketdaily.com
NEW ISSUES
- BHH EU500m 7Y Covered MS -1
- BNG EU1.75b 7Y MS +7
- Carnival EU500m 5Y MS +160
- Honeywell EU4b 2Y FRN, 4Y, 7Y, 12Y Fixed Bonds
- ING EU1.25b 5Y MS +73
- Deutsche Hypo EU500m 7Y Covered MS +1
- FMS Wertmanagement GBP250m 1.25% 3/2019 Tap UKT +45
- Nordea EU750m 3Y FRN 3mE +45, EU1.25b 7Y Fixed MS +80
- Stadshypotek EU1.25b 7Y Covered MS +19
- 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 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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