Halister News

(Bloomberg) -- Global credit mkts are cognizant that the timing of any Fed rate move over the coming months will likely require all macroeconomic stars to be aligned. Speculation about possible Fed tightening is not yet having any meaningful negative impact on corp credit valuations, but it could soon damp equity mkt sentiment and generic risk appetite, Bloomberg strategist Simon Ballard writes.

• US HY credit remains firmly anchored, now flirting with a 500bp OAS; traded as wide as 873bps on Feb 11 2016
  • EUR HY index similarly robust; currently quoted 330bps mid vs. 598bps Feb wide
• Risk appetite remains buoyed by Goldilocks perception of sustained low (positive) economic growth and interest rates
  • But investors need to maintain strong fundamental vigilance; S&PGR expects U.S. corp speculative-grade default rate to rise to 5.3% by March 17 from 3.8% in March 16 and 1.8% in March 15; EUR rate to rise to 1.8% by end June 2017 from 1.6% year earlier

• Risk Appetite Model looks solid as a rock
• CDX IG closed +0.2bps at 76.65 in overnight session; iTraxx Asia Ex Japan IG currently +0.1bps at 114.76 and iTraxx Australia quoted +0.4bps at 103.08

NEWS

• Corporate News
• Carlsberg 1H Organic Rev. Beats Ests., Keeps 2016 Outlook
• Cathay Pacific Drops Most in a Year After 1H Profit Misses Est.
• Peab 2Q Net Sales Beat Estimates; Order Intake Rises
• Hyundai Says It’s in Talks About Further Partnership With Google
• Bouygues Telecom Renegotiaties 35-Hour Week: Le Figaro
• Finnair Sees Slower FY Rev. Growth; Launches EU20m Savings Plan
• Laura Ashley 74-Weeks LFL Retail Sales up 4.1%

• Financial News
• ABN Amro Says 2Q Net Profit Impacted by Derivatives Provision
• Delta Lloyd Swings to 1H Net Profit, Gross Written Premiums Dip
• Admiral 1H Pretax Rises, Interim Div. Raised
• Industrial Plan for Monte Paschi Seen by Mid-September: Sole
• Credit Suisse Joins War for Quants, Hiring Rothman to Build Team
• QBE Cuts 2016 GWP Forecast Amid ANZ Pricing Drop; Misses Ests.

• Credit Rating News
• Australia Aaa Rating Affirmed, Outlook Stays Stable: Moody’s
• China Credit Growth Shows Rising Leverage: Fitch
• Possible Intouch Purchase May Threaten Singtel’s Ratings: Fitch

• Other News
• Tudor Said to Cut 15% of Workforce After Withdrawals, Losses
• Bank CoCos Seen Stronger on EU Proposal for Coupon Protection
• Global Central Banks Help Send Asian Bond Costs to Decade Low

ANALYST VIEWS

• Although corporate bond yields have tightened considerably relative to Treasury yields in recent months, corporate yield spreads still remain remarkably wide by historic standards .... (and) could still tighten considerably further yet in this recovery: Wells Fargo

NEW ISSUES

• NRW Bank $1b 5Y MS +39
• Intercontinental Hotels GBP350m 10Y UKT +155
• 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.