iMoneyNet - Money Market Fund Analysis
02 Feb 2018
Leading the industry in money fund news.
The corp market is back in business on Wednesday after holidays in parts of continental Europe kept a lid on supply in the first two days of the week.
A host of borrowers are looking to capitalise on a small window of opportunity ahead of forthcoming event risk in the form of the Fed meeting today which precedes US Payrolls data on Friday and US presidential elections on November 8th.
Statoil takes two-pronged approach
Statoil (Aa3/A+) is marketing a Euro 2-part benchmark under the guidance of Barclays, BNP Paribas, Deutsche Bank and Mizuho. Books opened at m/s +50 area IPTs on the 10yr tranche (09-Nov-2026) and m/s +75 area on the 20yr (09-Nov-2036).
By our calculations this outlines a concession of ca. 16bps on the 10yr based on an interpolation of the issuer's outstanding 2.875% Sep 2025 and 1.25% Feb 2027 lines at ca. m/s +29 and +36 bid pre-announcement.
Meanwhile, the new 20yr extends Statoil's curve from the 1.625% Feb 2035 which was bid in the m/s +42 area indicating fair value in the high 40s area.
This represents the Norway headquartered international oil and gas company's first foray into the single currency since Feb 2015 and follows recent falls in global oil prices which has seen Brent crude slump to its lowest levels in over a month.
The contract was down another 1.60% at USD47.38 as at 09:47 GMT, after API revealed a crude stockpiles increase, which now represents a decline of over 12% since the contract's October peak of USD54.06 (on 10th).
Meanwhile, Statoil's aforementioned 2035s have edged around 7bps wider compared to valuations in late September.
Dover Corp latest US issuer to hit Euro screens
Dover Corporation (A2/A-/A), the American conglomerate manufacturer of industrial products, is marketing an expected EUR500m 10yr line at m/s +100/105 IPTs via JP Morgan, BAML and Wells Fargo. The trade follows a roadshow last week where Dover Corp canvassed its credentials for a 10-15yr transaction, with the issuer subsequently choosing the shorter maturity.
Dover Corp has just one outstanding Euro issue, a EUR300m 2.125% Dec 2020 line which launched back in Nov 2013 and was seen trading at circa m/s +56 bid pre-announcement.
The issuer is following US compatriots Verizon Communications, PPG Industries Inc, Whirlpool Finance Luxembourg S.a.r.l. and Merck & Co Inc which all visited the single currency last week to print a combined EUR5.65bn.
Abertis makes second visit of the year
Spanish motorway operator Abertis Infraestructuras S.A.(BBB/BBB+) has also hit the screens on Tuesday with a EUR500m no grow long 10yr (Feb 2027) deal. Books opened via Barclays, BNP Paribas, Caixabank and Citi at m/s +75/80 IPTs.
Fair value for the trade is seen in the m/s +60 area when extrapolating the borrower's EUR700m 2.5% Feb 2025 and EUR1.15bn 1.375% May 2026 issues which were ca. m/s +50 and +56 bid pre-announcement. In turn this implies a NIC of 15/20bps at IPTs.
G4S and Fonterra offer rarity value
First out the blocks this morning was UK headquartered security solutions company G4S International Finance plc, rated BBB- by S&P (negative outlook) which is accessing the Euro market for the first time in four years.
Via leads BofA Merrill Lynch, ING, Lloyds Bank and Santander, the issuer is touting an expected EUR500m long 6yr (Jan 2023) trade at m/s +170/175 IPTs. This follows a European roadshow last week.
As previously mentioned, G4S hasn't issued in the single currency since Nov 2012 when it printed a EUR500m 2.625% Dec 2018 line which was bid at around m/s +62 pre-announcement, whilst the borrower's only other Euro deal outstanding is a EUR600m 2.875% May 2017 which was at an indicative +39 bid.
Elsewhere, following investor meetings in late October, New Zealand headquartered multinational dairy co-operative Fonterra Co-operative Group Limited (A-/A) has gone live with an 8yr issue.
Expected to be EUR350-500m in size, marketing has began at m/s +65 area IPTs via Citi, Deutsche Bank, HSBC and SG CIB.
Fonterra currently has no Euro trades outstanding with the borrower's one and only fixed-rate benchmark in the single currency coming way back in May 2002 when it issued a now matured EUR500m ex 5yr (May 2007) line.
This makes it difficult to accurately pinpoint fair value, which was instead gauged from a host of recent corporate bonds and those issued by other Australasian borrowers as shown below.
*** FONTERRA 8YR COMPS ***
Indicative pre-announcement bid-side level vs. I-spread
Bond Rating MS+
DANONE 0.709 24 (Baa1/BBB+) 47
ADM 1� 23 (A2/A) 29
CARGIL 2� 23 (A2/A) 47
BMY 1 25 (A2/A+) 30
MRK 0.5 24 (A1/AA) 25
GIS 1 23 (A3/BBB+) 50
GIS 1� 27 (A3/BBB+) 55
KYGID 2? 25 (Baa2/BBB+) 55
DGELN 1� 24 (A3/A-) 25
DGELN 2? 26 (A3/A-) 41
Bond Rating MS+
TLSAU 2� 23 (A2/A) 30
TLSAU 1? 26 (A2/A) 36
ANVAU 3 24 (A3/A-) 44
ANVAU 1� 27 (A3/A-) 48
Fonterra is only the second New Zealand issuer to hit the screens this year after Chorus printed a EUR500m 1.125% Oct 2023 deal last month, whilst looking at the broader region there has also only been three Australian corporates in the single currency in 2016.
For Australian corps in particular, this is mainly due to the fact that a number of them already have healthy balance sheets having pre-funded in 2015, which one source attributed to a desire to get in ahead of the expected funding requirements of the privatisation of the electricity assets in QLD and NSW.
This has been accentuated by the fact that the basis swap has not been particularly accommodating this year, while the USD market has been able to offer more attractive pricing for those that have wanted to fund.
Three join the pipeline
In other primary news, there have also been additions to the pipeline this morning to report.
Specialist real estate company Aroundtown Property Holdings PLC (BBB) undertook an investor call at 9.30 UKT today via Morgan Stanley ahead of a potential tap of its EUR500m 1.5% Jul 2024 bond which launched in July this year. For note this was seen trading at circa m/s +38.5 bid this morning.
Also holding an investor call today, at 10.30 UKT, was Dutch chemical company LyondellBasell Industries (Baa1/BBB). The call is to be led by JP Morgan and HSBC and a possible EUR 12yr benchmark will follow.
Looking further ahead, and global residential property company Akelius Residential Property AB (BBB-) has hired Bayern LB, BNP Paribas, Danske Bank and Swedbank as joint bookrunners to arrange a series of European fixed income investor meetings from 7-14 November, ahead of a possible EUR 5-7yr benchmark.
Akelius' one outstanding Euro issue, a EUR300m 3.375% Sep 2020 was around m/s +148 bid at the time of writing.
Primary busy despite risk-off tone
This massive uptick in primary market activity comes despite a broader risk off tone, where at 10.44 GMT Stoxx50 was down 0.85%, spearheaded by the financials component at -2.32%.
This is consistent with a bearish session overnight in Asia with markets very much in the grip of US election jitters, reflecting the fact that next week's vote is too close to call.
This was brought home yesterday as the latest Washington Post/ABC poll gave Trump a narrow 1% lead, a stark contrast to the 12% lead that the same poll showed for Clinton back on October 23rd.
Elsewhere, synthetic markets are demonstrating a bit more resilience however where the iTraxx Main was +0.22 at 75.43 with the Crossover actually 0.25 tighter at 336.85.
And cash is even more ring fenced from the broader market tone as illustrated by the recent batch of deals on our snapshot which are almost unanimously tighter compared to Tuesday's levels, supported by the blank primary slate in the first 2 days of the week.
|Issuer||Deal||Re-offer spread||Current spread & change vs previous day||Rating|
|TVOYFH||2.625% 01/23||MS+260||MS+245.5 (-1)||BB+/BBB|
|WHR||1.250% 11/26||MS+87||MS+81 (-2.5)||Baa1/BBB/BBB|
|PUBFP||0.500% 11/23||MS+50||MS+50 (unch)||Baa2/BBB+|
|PPG||0.875% 11/25||MS+60||MS+56.5 (-1)||A3/A-/A-|
|PPG||0.000% 11/19||MS+25||MS+21 (-1.5)||A3/A-/A-|
|ORAFP||0.875% 02/27||MS+45||MS+44.5 (-1)||Baa1/BBB+/BBB+|
|MRK||1.375% 11/36||MS+50||MS+41 (-1.5)||A1/AA|
|MRK||0.500% 11/24||MS+28||MS+26 (-1)||A1/AA|
|VZ||1.375% 11/28||MS+83||MS+80 (-2)||Baa1/BBB+/A-|
|VZ||0.875% 04/25||MS+65||MS+62 (-2)||Baa1/BBB+/A-|
|VZ||0.500% 06/22||MS+50||MS+46 (-1.5)||Baa1/BBB+/A-|
|MRLSM||1.875% 11/26||MS+160||MS+159 (-0.5)||Baa2/BBB|
|BNFP||0.167% 11/20||MS+28||MS+24.5 (-1)||Baa1/BBB+|
|BNFP||0.424% 11/22||MS+40||MS+37.5 (-0.5)||Baa1/BBB+|
|BNFP||0.709% 11/24||MS+50||MS+47.5 (-1)||Baa1/BBB+|
|BNFP||1.208% 11/28||MS+65||MS+59 (unch)||Baa1/BBB+|
|IREIM||0.875% 11/24||MS+80||MS+92 (+2)||BBB|
|COLSM||1.450% 10/24||MS+135||MS+137.5 (-0.5)||BBB-|
IGM FX and Rates
31 Jan 2017
Between the inevitabilities of death and taxes one would like to hope there’s room for a comfortable, perhaps a long, retirement. Alas, the data on that possibility is rather depressing for an awful lot of Americans.