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We are without supply for a second consecutive day on Tuesday with the partial European holiday thinning out market participation whilst shadows lengthen on looming event risk in the form of BoE and Fed meetings as well as US payroll data later in the week.

Oil companies see differing Q3 results

Away from supply and earnings season remains in full swing with a duo of energy companies amongst the latest firms to report Q3 results this morning.

British oil and gas company BP Plc revealed underlying cost profit of USD933m, which although beat analyst estimates, was still down 49% on the same period last year. As a result, this saw BP's shares drop where, at the time of writing, they were down circa 2.92%. The company highlighted the slump in global oil prices as well as one-off expenses for the near halving of profits.

Faring better was Anglo-Dutch peer Royal Dutch Shell which smashed analysts' Q3 profit estimates. Shell reported profit of USD2.75bn (up 17% Yoy) beating an average estimate of USD1.79bn from those surveyed by Bloomberg.

Whilst the plunge in oil price has also affected Shell, the company highlighted increased production as the main reason for the positive earnings release which was largely attributed to the circa USD50bn acquisition of BG Group Plc which concluded in February. On the back of the news, Shell's shares have risen by around 3.2% at the time of writing.

Looking at the oil markets today and following a slight bounce this morning, Brent has pared its gains and is back around where it started the day. As at 09.57 GMT Brent was up +0.04% at USD48.63 a barrel which is up from the Oct low of USD48.45 seen Monday which came amid concerns regarding possible complications on the OPEC supply accord. For note, October's peak stood at USD53.73 on the 10th.

Paring of gains is also very much the story for the broader risk markets which opened up the month on the front foot before being largely flat by mid morning. As at 10.05 GMT this left the Stoxx50 down 0.06%, whilst in synthetic markets the iTraxx Main was +0.01 at 73.12 with the Crossover 1.78 tighter at 328.77.

Back to oil companies and American multinational conglomerate General Electric has merged its oil and gas division with compatriot Baker Hughes to create a mammoth company which will have USD32bn of combined revenues.

GE is paying USD7.4bn to fund the USD17.50 per share dividend to Baker Hughes shareholders and General Electric will own 62.5% of the resultant business whilst Baker Hughes will own the remainder. Impact on General Electric's debt has been minimal, where for example, the issuers EUR1.25bn 1.875% May 2015 line has widening just 1bp to +39 bid.

ECB's CSPP rate drops in latest week

In other news, the ECB published its latest CSPP figures on Monday, revealing it has now purchased EUR37.815bn of corporate securities since the start of the programme, having added EUR1.915bn in the week to Oct 28th. This implies a daily purchase rate of EUR383m which is down from the EUR420m seen last week. See yesterday's CSPP REVIEW for more detail.

Rounding off with a look at the secondary market and the recent batch of deals on our snapshot remain well bid with a clear tightening bias present. TVO's 2.625% Jan 2023 line continues to impress, bid another 2.5bps tighter and now 13.5bps tighter than reoffer.

Issuer Deal Re-offer spread Current spread & change vs previous day Rating
TVOYFH 2.625% 01/23 MS+260 MS+246.5 (-2.5) BB+/BBB
WHR 1.250% 11/26 MS+87 MS+83.5 (-1.5) Baa1/BBB/BBB
PUBFP 0.500% 11/23 MS+50 MS+50 (unch) Baa2/BBB+
PPG 0.875% 11/25 MS+60 MS+57.5 (-1) A3/A-/A-
PPG 0.000% 11/19 MS+25 MS+22.5 (-1.5) A3/A-/A-
ORAFP 0.875% 02/27 MS+45 MS+45.5 (unch) Baa1/BBB+/BBB+
MRK 1.375% 11/36 MS+50 MS+42.5 (-0.5) A1/AA
MRK 0.500% 11/24 MS+28 MS+27 (unch) A1/AA
VZ 1.375% 11/28 MS+83 MS+82 (-0.5) Baa1/BBB+/A-
VZ 0.875% 04/25 MS+65 MS+64 (-1) Baa1/BBB+/A-
VZ 0.500% 06/22 MS+50 MS+47.5 (-1.5) Baa1/BBB+/A-
MRLSM 1.875% 11/26 MS+160 MS+159.5 (unch) Baa2/BBB
BNFP 0.167% 11/20 MS+28 MS+25.5 (-1) Baa1/BBB+
BNFP 0.424% 11/22 MS+40 MS+38 (-0.5) Baa1/BBB+
BNFP 0.709% 11/24 MS+50 MS+48.5 (unch) Baa1/BBB+
BNFP 1.208% 11/28 MS+65 MS+59 (-0.5) Baa1/BBB+
IREIM 0.875% 11/24 MS+80 MS+90 (unch) BBB
COLSM 1.450% 10/24 MS+135 MS+138 (+0.5) BBB-

matthew.barrett@informagm.com

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