Halister News

(Bloomberg) -- As expected, the FOMC refrained from raising rates overnight and EU credit mkt reaction today looks set to be positive. The case for a future hike may have strengthened, but the Fed remains guarded for now on timing and on the terminal rate, all of which should be a near-term fillip for risk appetite, Bloomberg strategist Simon Ballard writes.

• Notwithstanding recent weakness in govt bonds and back up in yields, cautious Fed rhetoric and a still-accommodative ECB suggest we are not yet in bearish environment for bonds
  • WIRP now pricing 61% prob of Fed rate rise in Dec, but still in low for longer territory, ECB may expand QE/CSPP by year-end; positive drivers of risk appetite and corp bond valuations
• But macro backdrop and rates outlook uncertainty should limit depth of risk tolerance; investor focus on capital preservation/risk selection, acceptance of low yield, low returns paradigm
• Risk Appetite Model weakness going into Fed may now be reversed as rates left unchanged
• Bloomberg Barclays Eur-Agg Corporate index closed yday at 112bps (+1bp); Bloomberg Barclays Eur HY index closed at 412bps (-1bp)
• CDX IG closed -2.1bps at 75.19 in overnight session; iTraxx Asia Ex Japan IG currently -4.9bps at 116.87 and iTraxx Australia quoted -4.2bps at 103.42

NEWS

• Corporate News
• Kier Says FY Results In Line With Its Expectations
• M&C Saatchi Reports Strong 1H, Says 2H Started Well, in Line
• HB Fuller 3Q Adj. EPS, Rev. Miss Ests., Narrows Yr Adj. EPS View
• Apple’s Talks With McLaren, Lit Motors Show Roads to Car Product
• BHP issues warning over Nationals mining tax plan, as Brendon Grylls hits back

• Financial News
• Lloyds of London 1H Pretax, Return on Capital Rises
• Development Bank of Southern Africa FY Profit More than Doubles
• Julius Baer CEO Says Asia Revenue May Top Europe in 5 Years
• Standard Chartered Agrees to Fund $5b Power Africa Projects

• Credit Rating News
• S&PGR Says Cost Sharing May Shield Aust Ports, Rail Networks
• South African Rating Cut a Serious Risk, De Beers CEO Says

• Other News
• Dubai Said to Seek $2.5 Billion Loans to Expand Metro for Expo

ANALYST VIEWS

• So, the Fed decided not to move (but) the rate tightening cycle was, after all, supposed to have begun several years ago. There’s little more to add here, except that risk assets should be better bid for a while now: creditmarketdaily.com
• Supply/demand balance should become even more stretched, despite CSPP purchases running at full speed. Credit spreads are therefore likely to continue their recent slow drift wider, and in particular outside the CSPP-space better entry levels should remain in store: Commerzbank

NEW ISSUES

• Cades EU250m 0.5% 5/2023 Tap FRTR +7
• Madrid EU500m 8Y Interp SPGB +26
• mFinance France EU500m 4Y MS +157
• MCS Groupe EU200m 5NC2 Senior Secured FRN 3mE +575
• Santander Consumer Bank EU500m 3Y Snr Unsecured MS +58
• Avis Budget EU300m 8NC3 Senior Notes 4.25% Area
• Groupe Fnac EU650m 7NC3 Senior Notes 3.375% Area
• 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.