It's a good job that corporates stayed reasonably active this week as, without them, total IG supply in the single currency would have limped in at paltry EUR2.0bn. Thankfully, corps contributed another EUR6.05bn, taking the week's IG total up to EUR8.05bn but still a country mile short of the EUR36.23bn raised by IG borrowers the prior week. For more stats and observations on this week's Euro supply, please see (VOLUME REPORT).
To be fair though, with the week delivering a flurry of CB verdicts, risk markets rocked by election jitters and the first two days affected by partial European holiday's, reasons for a sharp drop in supply were not hard to find and the hope will be for a clear result next week so that markets can re-price and then move on.
NAB get in ahead of payrolls and election shutdown
Given the likelihood that engaging with investors next week will be tricky into Tuesday's vote and the uncertainty that lies beyond, there were still some issuers looking to lock in funding on Friday though where National Australia Bank (Aa2.AA-/AA-) decided to get in ahead of both payrolls and a likely election shutdown early next week. That saw the issuer follow up on a mandate that was announced Thursday although it seems the response was a little tepid with the EUR500m sized 7yr senior line receiving reported demand of EUR800m+ while books on the GBP450m 5yr sterling covered tranche were touted at GBP400m+.
Risk markets stay defensive into weekend
On the day, US payrolls garnered less attention than usual and brought mixed news with a headline miss more than offset by upward revisions. Combined with decent earnings growth, that was enough to keep markets largely positioned for a Dec hike where the probability was sitting at around 76% after the data, down just a couple of percentage points on the day.
Stocks were wavering after the data and, as we went to print, it was up in the air whether or not the S&P500 would avoid a ninth straight loss. That's a long winded way of saying that markets were pretty much in wait and see mode pending Tuesday's US vote. Otherwise, as at 15.30 GMT, European markets were looking at more losses with Stoxx50 0.7% lower at which point iTraxx Main and Crossover were wider by 1.3 and 4.7 respectively with both having touched fresh multi-week wides intraday.
And staying with the political theme, Friday proved another rocky day for BTPs which underperformed bunds by up to 8bps in the 10yr maturity amid ongoing uncertainty into the 4th Dec vote on constitutional reform.
What to expect next week?
Looking to next week and what can be said is that while this week provided plenty to distract investors, partly explaining the big drop in Euro supply, there's still little sign that investors are deserting the asset class en-masse. On the contrary, data from EPFR showed investors were pouring money into Euro denominated IG funds at the fastest pace in the 10 weeks in the week ending Wednesday.
Taken together with the fact that corps were still able to print this week against a very challenging backdrop, that would lend weight to the assertion that corporate credit still retains something of a haven status and, at the very least, suggests that investors still see limited alternatives, despite the recent repricing of inflation risks.
Looking ahead to Monday's event risk
All the above said, while some of the factors crimping supply this week were transient in nature (CB verdicts and NFPs) Monday is still going to be a challenging session in terms of engaging investors which seems likely to keep primary largely sidelined once again despite a lack of scheduled event risk on the day.
For interest though, German Factory orders are due in the early hours and seen weaker at 0.1% MoM from 1.0% previously, while Spanish Industrial Output is seen moving in the same direction, estimated at 2.6% SA YoY from 4.0%.
Meanwhile, Eurozone Sentix Investor Confidence is forecast to inch higher, to 8.6 from 8.5, while Retail Sales are also seen firmer, at 1.2% YoY from 0.6% previously.
UK Halifax House Prices are the only release out in the UK, while across the pond the calendar is devoid of any top-tier data.
Afternoon focus will thus be on the latest CSPP tally and ECB's Lautenschlaeger who is due to speak at 16.00GMT.
Earnings are light with just 5 and 12 Stoxx600 and S&P500 companies due to report respectively.
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