Halister News

(Bloomberg) -- U.K. energy firm GB Energy Supply’s announcement that business has become untenable due to recent energy price rises highlights potential impact of commodity and bond yield volatility on credit fundamentals, Bloomberg strategist Simon Ballard writes.

• Rates market direction and December political risk to remain key drivers of near-term credit market performance
• Higher commodity input prices weigh on corporate profitability, credit quality; higher yields, debt service costs most onerous on balance sheets of lower-rated issuers that have benefited from cheap credit
  • Corporate bond markets weakened, returns eroded by higher yield structure even as ECB and BOE maintain corp bond purchase programmes
• Italian banks also under spotlight ahead of Dec. 4 referendum; ‘No’ vote for Renzi may create sharp negative mkt reaction, test sustainability of banks

• Bloomberg Barclays Eur-Agg Corporate index closed Friday at 125bps (+1bp); Bloomberg Barclays Eur HY index closed at 424bps (+1bp)
• CDX IG closed Friday at 73.16 (-0.6bp); iTraxx Asia Ex Japan IG is currently +0.6bps at 127.74 and iTraxx Australia quoted +0.5bps at 110.17

NEWS

• Corporate News
• Deutsche Telekom Network Down in Parts of Germany
• Sistema 3Q Sales Up 1.3% Y/y Driven by Detsky Mir, Segezha Group
• Veolia Gets Contract for Wastewater Treatment Plant for Aramco
• Aryzta 1Q Total Revenue Declines 3.3%; EPS Outlook Unchanged

• Financial News
• Biggest U.K. Banks Seen Struggling in Toughest Stress Tests Yet
• VTB October Net Interest Income 34b Rubles, Up 6.6% Y/Y
• Small China Banks to Chase Riskier Debt as Borrowing Costs Rise
• Aberdeen AUM GBP312.1b Year-End; Further Outflows from Sentiment

• Rating News
• China Residential Property Market Outlook Stable in ’17: Moody’s
• S&PGR: Tata Group Rtgs Unaffected By Board Discord

• Other News
• Morgan Stanley Sees Wider Asia Credit Spreads, Stays Underweight
• Deutsche Bank Wealth Cautious on Indonesia Bonds After Trump
• Resimac Plans A$300 Million Mortgage Bond Issue, Fitch Says
• Fillon Unites French Right With Primary Win as Socialists Split

ANALYST VIEWS

• November has become the cruelest of months for corporate bond market investors. Having survived a weak January and February, recovered strongly in the period from March to October, we are about to record the first negative month for performance since those opening months (of the year). Investors are fretting because it looked so good just three weeks ago: creditmarketdaily.com

NEW ISSUES

• No new issues priced Friday
• European IG credit pipeline here and HY credit pipeline 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.