iMoneyNet - Money Market Fund Analysis
02 Feb 2018
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It was a more muted session in the primary market on Thursday with only French corporate Vivendi SA (Baa2/BBB) refreshing its Euro curve on the day, adding to the EUR9.65bn of IG corporate issuance already seen this week.
The media conglomerate took no chances with the pricing of its new 7yr after consistent signs that investors are becoming increasingly cautious, reflected by very mixed book sizes and some underwhelming secondary market performances of recent deals, amid heightened volatility elsewhere since the US elections.
Whilst final demand of over EUR1.1bn was hardly a blowout it was nevertheless sufficient for the issuer to print EUR600m of Nov 2023 paper at m/s +80, albeit just 5bp inside IPTs of m/s +85 area and only the mid-point of +80 (+/-3) will price in range guidance.
This reoffer level left a healthy premium on the table for investors of ca. 23bps with fair value pegged at around m/s +57, while the size of the trade was also not pushed by the issuer, with the EUR600m taken being towards the middle of the expected EUR500-750m size range which was being targeted at guidance.
The sizeable final NIC leaves hope that the deal can go on to perform in the secondary market and is something to keep an eye on, although should this be the case then the deal would certainly buck the broader spread widening seen in the EUR corporate cash market of late.
This also bodes with feedback from our contacts who have seen some sizeable outflows from London based institutional credit funds this week.
That said, as always it will be worth monitoring the latest EPFR fund flow data which is released overnight Thursday and we will report early Friday morning, for another key proxy of investor sentiment towards credit markets.
Two more for the pipeline
While the primary corporate market witnessed a slowdown on Thursday, there was another two additions to the ever-growing pipeline where Euroclear Investments and Gas Networks Ireland hired banks for investor roadshows ahead of potential EUR issues.
The latter appointed Barclays, BNP Paribas and HSBC to arrange a series of investor meetings in London and Europe starting 21 November, ahead of one or two potential medium/long dated EUR tranches.
Meanwhile, Euroclear Investments, mandated SocGen as global coordinator and bookrunner along with Citi and JP Morgan to conduct a European roadshow commencing 21 November ahead of a possible inaugural EUR600m senior unsecured 10yr issue.
These join a host of additional corporate names in the pipeline although some of the more price sensitive ones may decide to put their funding plans on ice until the new year unless market conditions improve significantly in the few remaining weeks we have left this year.
However, with uncertainty regarding Donald Trump's next moves likely to continue to keep government bond markets volatile (peripheral yields up another 5-7bps on Thursday), and more headline event risk in the weeks ahead such as the Italian referendum, US payrolls, FOMC and ECB meetings, that could be a big ask.
Regional markets largely flat
Turning to broader risk markets, and regional stocks remained largely flat during trading on Thursday although EuroStoxx50 did manage a minor push higher in late trading and was +0.25% at 15:50 GMT with all sub-sectors higher except consumer staples (-0.31%) and financials (-0.43%).
Elsewhere, in synthetic credit the iTraxx indices posted a completely opposite trend, drifting higher in late trading which saw the Main and Crossover both meandering ca. their intra-day highs into the European close (Main +0.45 at 79.86 and Crossover -1.70 at 343.69).
Finally, in oil markets Brent was up 1.65% at USD47.41 as at 15.10, with increased optimism that an OPEC deal to limit production could be agreed.
Friday's event risk
It's another data light day in Europe on Friday. Germany reports Producer Prices, which are seen less negative in Oct, a day after final Eurozone inflation matched the flash print with a pick up to 0.5% from 0.4% previously.
There is also no top tier data out in the US, although for interest the Leading index is seen softer in Oct at 0.1% from 0.2% previously.
Thus the focus will be on central bank speakers for any policy clues with ECB's Draghi and Weidmann as well as Fed's Bullard all due to speak.
There are no significant term auctions scheduled in Europe or US, while earnings trickle down to 2 Stoxx600 and 1 S&P500 companies.
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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.