Halister News

(Bloomberg) -- With the ECB CSPP having acquired a further EU2.3b of bonds last week, focus is likely to turn to the start of the BOE’s corp bond buying program today. Recent Deutsche Bank and Lufthansa headlines highlight some of the challenges facing credit mkt sentiment, but central banks’ backstop bids should alleviate capitulation fears, Bloomberg strategist Simon Ballard writes.

• ECB bought EU2.316b of bonds last week vs EU2.657b prior week as implicit backstop bid continues; now holds cumulative EU27.868b
  • From today, BOE CBPS will purchase up to GBP10b of GBP corp bonds of ‘firms making a material contribution to the UK economy’
  • Program has been well telegraphed, so impact may be largely priced into spreads already, but nevertheless should still see net positive (tightening) reaction across the asset class
• Political uncertainty intensifying in U.S. election outlook; may damp allure of U.S. corp credit risk at time of tentatively improving corp credit macro fundamentals; first Clinton/Trump election debate seen as a ‘win’ for Clinton
• Risk Appetite Model eases back as uncertainty creeps back in
• Bloomberg Barclays Eur-Agg Corporate index closed yday at 112bps (unchanged); Bloomberg Barclays Eur HY index closed at 411bps (+4bps)
• CDX IG closed -0.5bps at 73.11 in overnight session; iTraxx Asia Ex Japan IG currently -4.2bps at 115.60 and iTraxx Australia quoted +0.6bps at 104.58

NEWS

• Corporate News
• Wolseley FY Revenue, EPS In Line; Announces U.K. Repositioning
• Thomas Cook Keeps FY Profit Outlook, Winter Bookings In Line Y/y
• Samsung Customer in China Reports Battery Fire in New Note 7

• Financial News
• Deutsche Bank rights issue ‘looks inevitable’: Citigroup
• Commerzbank to announce 9,000 job cuts, dividend freeze: HB
• ADB Raises China Growth Est. on Fiscal, Monetary Stimulus
• Julius Baer Says Singapore Court Dismisses Accumulator Claim

• Credit Rating News
• S&PGR Afrms Weichai ‘BBB’ Rtg; Otlk Negative; Rtgs Off CWatch
• S&PGR Affirms Jamaica ‘B/B’ Ratings; Outlook Remains Stable

• Other News
• BlackRock Issues Warning on Treasuries as Fed Moves Toward Hike
• Clinton, Trump Draw Stark Contrasts With Sharp Debate Attacks
• Perry Capital Closing Flagship Fund After Almost Three Decades

ANALYST VIEWS

• Deutsche Bank is too big to fail. We understand the market’s reaction to the news - after all, we don’t like uncertainty - but the weakness should be seen as an opportunity: creditmarketdaily.com
• Regard relief rallies into the mid-60s in Main and low 300s (Xover) as opportunities to buy protection... confirms overall neutral tactical stance in cash. Suggest investors bide their time on outer rim of the CSPP space, as the coming weeks might bring along opportunities in IG subs and EUR HY: Commerzbank

NEW ISSUES

• Lower Saxony EU350m 0% 8/2024 Tap MS -17
• EnBW $300m 60NC5.5 Bond 5.125% at Par
• Norwegian Air Shuttle EU60m 7.25% 2019 Tap 104
• 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.