Halister News

(Bloomberg) -- With Theresa May set to be PM by tomorrow, there’s more clarity to U.K. politics; that could underpin GBP risk appetite and trigger some re-compression of the corporate credit quality curve. But the myriad questions around Brexit execution may still weigh on spreads, Bloomberg strategist Simon Ballard writes.

• GBP IG/HY spread ~400bps, widest since June 2013, as cautious investor sentiment has driven up-in-quality, defensive haven strategies
  • EUR IG/HY spread now ~330bps (-160bps YTD, -100bps since ECB announced CSPP on March 10)
• IMF shows concern about Italian banks’ balance sheets, noting “very high” NPLs; said “concerns related to the bail-in of retail investors should be dealt with appropriately”
• Risk Appetite Model shows recent increase in post-Brexit result, but fading spread dispersion as risk rallies
• CDX IG closed flat at 77.31 in overnight session; iTraxx Asia Ex Japan IG currently -4.6bps at 129.23

NEWS

• Corporate News
• Qatar Airways Quadruples Profit on Lower Fuel Costs
• Boeing, Airbus Duel for $12 Billion Deal With India SpiceJet
• Tencent-Backed Electric Carmaker Seeks Investors for 2020 Debut
• PSA Sees ‘Slower’ 2H European Car Market Due to Brexit
• South Africa Exempts Telkom From Parts of Public Finance Act
• U.S. Natural Gas Futures in New York Rebound From 2-Week Low
• EDF Enters China Wind Energy Mkt Buying 80% Stake in UPC AWM
• Ahold, Delhaize Still Expect Merger To Complete By End of July

• Financial News
• DNB Profit Drops as Loan Losses Rise at Norway’s Largest Bank
• UBS’s Orcel Signals Halt to Years of Investment Bank Cuts
• Tryg to Pay Semi-Annual Dividend of DKK2.60

• Credit Rating News
• Moody’s Sees Brexit Negligible Credit Impact on GCC Sovereigns
• Fitch Sees Record Credit Downgrades

• Other News
• For Wall Street Bond Strategists, There’s Wrong and Less Wrong
• U.K. LFL June Retail Sales Fall 0.5% Y/y, BRC Says
• Pokemon Go Was an April Fool’s Joke Before It Became a Giant Hit

ANALYST VIEWS

• Distressed exchanges have contributed significantly to the rise in defaults this year, including a significant number of serial defaults that have remained in the default rate far longer than the normal twelve-month period: CreditSights
• Analyst estimates point to a modest contraction in 2Q earnings, with energy, the big-5 banks, and Apple doing the most damage. However, the real story is the lack of a powerful underlying trend even after these headwinds are removed: RBC

NEW ISSUES

• Aroundtown Property EU500m 8Y MS +205
• Deutsche PBB GBP100m 1.875% 12/2019 Cov Tap at UKT +92
• PepsiCo EU750m 12Y MS +47
• Salini Impregilo EU171.7m 3.75% 6/2021 Tap at 102.25
• 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.