HALISTER1: EU CREDIT DAILY: Drifting Away; LNAFP Gains, BLK Joins VW Action

EU CREDIT DAILY: Drifting Away; LNAFP Gains, BLK Joins VW Action

(Bloomberg) --Credit spreads drifting wider in recent sessions and steepening of quality curve with rates selloff has damped secondary mkt risk appetite, although primary mkt flow remains buoyant. Spreads not yet seen as at wholesale relative value re-entry point, Bloomberg strategist Simon Ballard writes.
  • Overhang of macro, monetary policy uncertainty fueling more discerning investor approach to risk
    • Ziggo (Ba3/BB-) 10y EUR/USD expected new issue may be litmus test for depth of risk appetite going into 4Q; revives specter of shareholder-friendly initiatives with proceeds said for partial refinancing of term loans but also distribution to shareholders
  • Despite strong close to U.S. credit/equity mkts and Asian/Australian risk assets trading better overnight, futures market suggests modest downside risk to EUR corp bonds this morning
  • Risk Appetite Model stable as secondary market corp bond spreads continue to edge wider in unison
  • Bloomberg Barclays Eur-Agg Corporate index closed yday at 110bps (+1bp); Bloomberg Barclays Eur HY index closed at 407bps (+18bps)
  • CDX IG closed -2.8bps at 77.06 in overnight session; iTraxx Asia Ex Japan IG currently -0.1bps at 112.53 and iTraxx Australia quoted -1.3bps at 98.75
NEWS
  • Corporate News
  • Telenor $1b Bond Exchangeable for VimpelCom ADSs W/ 0.25% Coupon
  • BlackRock Joins Investors Taking Legal Action Against VW
  • Le Noble Age Confirms 2016 Targets as 1H Op. Profit Gains 27%
  • Claire’s Elects to Delay Interest Payments
  • Solar Industries Cuts FY17 Rev. View on Forex, Lower Prices
  • Wizz Air to Start Route From Sofia to Georgia’s Kutaisi in Sept.
  • Tanzania Cigarette Co. Half-Year Profit Up 8% to TZS36.5b
  • Financial News
  • Deutsche Bank Rebuffs U.S. Over $14 Billion Mortgage Claim
  • SVG Says Harbourvest Offer Undervalues Co, Has Other Approaches
  • Credit Rating News
  • Newcrest Outlook Moved to Positive at S&P On Debt Reduction
  • Other News
  • U.S. Long Bonds Give Traders Lesson in Risk With September Rout
  • Bail-In Talks in Sweden Zero In on Refinancing Risks to Banks
  • Loaded With Cash, Some European Banks Still Have to Sell Bonds
ANALYST VIEWS
  • A jittery week, but not too indecent for corp bond mkts. It should be a quiet session today, but we ought to be on the up given the 1% rise in US stocks: creditmarketdaily.com
  • The experience from February’s selloff suggests CoCo mkt could be vulnerable should fears of coupon cancelations flare up again; with EUR CoCo spreads hovering around levels seen in early Feb, and about 200bps below subsequent selloff highs, we continue to suggest remaining defensive, waiting for higher visibility to emerge: Commerzbank
NEW ISSUES
  • Deutsche Bahn EU500m 12Y MS +20
  • Swiss Life EU600m PNC 5/2027 Subord MS +410
  • Lithuania EU450m 2.125% 10/2035 Tap MS +28
  • 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.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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