Halister News

(Bloomberg) -- ECB has given a huge “risk-on” message to credit mkts, but some investors see move as a policy error likely to trigger concerns about future crowding-out problems, Bloomberg strategist Simon Ballard writes.

• ECB addition of EUR IG non-bank corporate bonds to QE buying will fuel risk appetite across the quality spectrum if investors perceive risk of having to hunt for liquidity in other areas of the credit mkt
  • But funding mkt for corporates was not “broken” so some investors may question ECB merit in buying corporate paper
  • Secondary credit mkt liquidity already poor; ECB move will only exacerbate difficulties in sourcing paper, trading
  • ECB may now be seen as lender of last resort for corporate credit mkt; implicit backstop bid may encourage complacent risk taking
• Risk Appetite Model highlights positive reaction to ECB rate and policy announcements

• CDX IG currently -3bps at 91.49 in overnight session; iTraxx Asia Ex Japan IG is currently -4.6bps at 141.81

NEWS

• Corporate News
• Samsung Warns of Competition as Investors Vote on Board Changes
• VW Unit MAN SE Reports 2015 EU92m Op. Profit After Sales Drop
• JD Wetherspoon 1H Adj. Pretax Drops, 6-Wk LFL Sales Up 3.7%
• Porsche Said to Weigh Bosch, Panasonic for Tesla-Fighter Battery
• BHP Says Samarco Has Confirmed It’s Seeking Restart Approvals

• Financial News
• Old Mutual to Be Broken Up as CEO Hemphill Chases Growth
• JPMorgan Said to Cut Credit Traders Amid Emerging-Market Swings
• Banks Should Expect Watered-Down EU Cyber-Security Rules Soon

• Rating News
• Moody’s affirms Genworth Australia’s A3 rating; outlook remains Negative
• Negative Rates Put More Pressure on Japanese Banks’ NIM: Fitch
• S&P Affirms Nasdaq ’BBB’ Ratings; Outlook Remains Stable
• N.Z. Banks Face Rising Macro-Economic Pressure, Fitch Says

• Other News
• Asian Stocks Rally With U.S. Futures, Crude Oil as Dollar Falls
• Pimco Increases Government Bond Stake Just in Time for Selloff
• Draghi Can Cut Borrowing Costs, But Can’t Make Companies Borrow
• China Said to Plan New Rules Facilitating Debt-to-Equity Swaps

ANALYST VIEWS

• It is fair to say that the ECB pretty much overdelivered. But oh dear! They have added IG non-financial corporate bonds to the list of assets they can buy under the bond purchase program. Someone has been in the asylum too long: creditmarketdaily.com

NEW ISSUES

• No priced new issues Thursday

• 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.