IGM Credit, IGM FX and Rates
23 Nov 2020
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** A solid start to the week in the primary market saw EUR4.4bn price in the single currency with the sterling market chipping in a further GBP3.25bn on the day. See the EUR NICS & BOOKS and GBP NICS & BOOKS reports for the breakdown of Monday's supply.
** Corps were out of the blocks strongly thanks to a EUR2bn multi-tranche exercise from E.ON which appeared to go okay, although at EUR3.25bn demand was more measured compared to what we're used to seeing in the EUR corp space. The sterling market was also given a boost by a multi-tranche GBP2.25bn benchmark from AB InBev which commanded a notably larger book in excess of GBP5.75bn. For more details see IGM CORP SNAPSHOT
** FIG was also active as UniCredit SpA and Swedbank catered for higher beta appetites with respective EUR1.25bn PNC6 AT1 and EUR650m 10.5NC5.5 Tier 2 transactions respectively, both of which were well received by investors. See IGM FIG SNAPSHOT for more analysis
** Barclays Bank was in the covered spotlight on Monday with a GBP1bn May 2020 floater which priced 5bps inside IPTs on high demand of ca. GBP2.9bn. See IGM COVERED SNAPSHOT for more details
IGM European Credit Weekly
** IGM European Weekly Credit Excel Spreadsheet is your comprehensive round-up of primary European new issue activity in Excel format, which allows users to conveniently download, save and edit the data as required. As well as new issue terms and conditions the spreadsheet incorporates additional data sets including distribution stats, book sizes, NICs and secondary market performance
IGM/EPFR Weekly Cheat Sheet in Excel
** IGM/EPFR Weekly Cheat Sheet provides proprietary intelligence on Euro primary market trends using various key data points in an easily digestible Excel spreadsheet. This includes Euro new issue volumes, average new issue concessions and book cover ratios across asset classes, as well as EPFR fund flow data and other key credit proxies
Tuesday's primary prospects
Republic of France (Aa2/AA/AA) has been rumoured to be planning a 30yr syndicated OAT for some time and now that the election is out of the way has mandated BNPP, Citi, JP Morgan and SG CIB to lead the deal (due 25-May-2048) on Monday. The current on the run 30yr OAT, the 3.25% May 2045 was yielding around 1.875% on Monday afternoon, equating to a spread of ca. m/s +41.5bps.
Republic of Slovenia (Baa3/A/A-) could hit the screens having mandated Barclays, BNP Paribas, Deutsche Bank, Goldman Sachs and J.P. Morgan to lead manage increases of its 1.250% notes due 22 March 2027 and 1.750% notes due 3 November 2040. See IGM PREVIEW for more
Kommunalbanken Norway (KBN), rated Aaa/AAA) is planning a EUR 10yr transaction having mandated BNPP, Citi, HSBC and Nomura to lead the trade, with fair value seemingly ca. m/s +4-5bps based on screen quotes on Monday.
Hamburger Sparkasse could pull the trigger on a EUR500m no grow 7yr Hypothekenpfandbrief having mandated Commerzbank, Defabank, DZ Bank, Erste Group and LBBW to spearhead the trade.
In dollars, Kommuninvest I Sverige AB, the Swedish Local Government Debt Office rated Aaa/AAA, is working a USD500m regS/144a Green bond due 01-Jun-2021) via Credit Agricole CIB, HSBC and JPM.
In sterling, Province of Quebec, rated Aa2/A+/AA-, is touting a benchmark RegS fixed rate Eurobond due 24 May 2022 via HSBC, RBC CM, NatWest Markets. IoIs are being taken at UKT (4% Mar-2022) +56bp area IPTs
Monday's broader market developments
** EU risk assets struggled to gain momentum in either direction, trading little changed at the time of writing, albeit after DAX and FTSE100 hit fresh record highs in early trade
** Price action supported by surge in oil prices as Brent jumped above USD52 to eke out a fresh high for the month, after indications from Saudi Arabia & Russia to back an extension of the OPEC-led deal and cut production for a further 9-months to March 2018
** US data headlined by Empire Manufacturing, at -1.0 in May (exp 7.5, prev 5.2)
** Govvies - EGB yields headed north, 10-30s core curves bear steepened amid a hawkish Der Spiegel article suggesting the ECB will lay the groundwork in July for a clearer exit strategy from its QE programme. 30yr OAT/Bund spread widened as France announced its long-awaited 30yr OAT mandate
** iTraxx indices sea sawed, both on course to end Monday's session marginally tighter though
Market snapshot (15.12 BST)
SXXP -0.08% / SX7P +0.53%
GER 2yr +0.4bps at -0.689% / 10yr +2.9bps at 0.414%
Brent +2.91% at USD52.32
iTraxx Main -0.6 at 62.7 / Crossover -4.0 at 254.0
What to watch Tuesday
** Data: Focus will be on UK releases in the shape of CPI and PPI, while in the Eurozone German ZEW indicators and Eurozone Q1 2nd estimate GDP take centre stage. Other European releases include French final EU Harmonised CPI, Italian Q1 Preliminary GDP and Eurozone trade figures. Across the pond, watching Industrial Production, Housing Starts and Building Permits
** Events: ECB's Nowotny and Coeure are the only central bank speakers currently scheduled on the day
** Supply: There are no significant term auctions scheduled in Europe or US on Tuesday 16th May
** Earnings: 10 Stoxx600 and 3 S&P500 companies report
IGM Credit, IGM FX and Rates
23 Nov 2020
While COVID remains well under control in mainland China, we have seen a surge in credit defaults there since the beginning of Q4. So far this quarter, we have seen four major bond defaults in China: 1. Huachen Auto Group, 2. Yongcheng Coal & Electricity Group, 3. Tsinghua Unigroup, 4. Fujian Fusheng Group. With credit quality in selected sectors worsening, interbank liquidity is going tighter regardless of less supply of government bonds in this quarter (chart 1) than the previous one. In interbank market, 1-month and 3-month repo are back at 3.00% and 3.20% respectively, the upper-end of their trading ranges since the middle of 2019 (chart 2). That means regardless of the counter-pandemic monetary easing across the globe since some 9 months ago, financing costs in mainland China, as represented by interbank repo rates, some how are back at their pre-pandemic levels.
Topics Industry News