20 Feb 2020
China Insight: From Peking Founder to MPA loosening
Thursday's primary highlights
** The primary market remained active on Thursday with nine issuers pricing a combined 12 tranches totalling EUR8.025bn, to bring the weekly issuance total up to EUR35.675bn, marking the busiest week since the w/e ending 19th May. For the breakdown of Thursday's EUR deals see IGM's DAILY EUR NICS & BOOKS
** Corps were dominant again, printing a combined EUR5.3bn which equates to just over 66% of the day's overall total, including a EUR3.5bn floating/fixed three-part from Volkswagen and a rare EUR500m 60NC5 hybrid from Evonik Industries AG. For more on these and a look at the day's other corp deals from Legrand (EUR1bn 7/15yr) and Samvardhana Motherson (EUR300m 7yr), see the IGM CORP SNAPSHOT
** The FIG spotlight was on the senior market where Rabobank's EUR1bn long 5yr trade landed with a modest NIC of just 2bps after amassing what leads described as a very high quality order book. Secondary senior spreads were mostly tighter. See IGM's FIG SNAPSHOT
** Bank of Queensland hit the screens with its EUR500m 5yr Australian Conditional Pass-Through Covered Bond. The deal landed at m/s +25 having been ramped in from initial +30 area guidance via interim guidance of m/s +27 area (+/-2) wpir, with the final NIC at around 5bps. For more including the official comps list, see IGM COVERED SNAPSHOT
** Federal State of Lower Saxony refreshed its LSA curve with a new EUR500m 10yr trade at m/s -15 having tweaked pricing from initial guidance of m/s -14 area with books in excess of EUR1bn. See earlier IGM SSA PREVIEW for relative value analysis
Friday's primary prospects
The fast pace of issuance looks set to slow tomorrow where at the time of writing there were no confirmed deals planned for Friday, which is traditionally a quieter day anyway and also marks both month and quarter end
Thursday's broader market developments
** Minor EU risk asset gains fade with equities biased marginally weaker, despite positive handover from US and Asia overnight, as taper fears continue to linger
** EUR/USD extends Tuesday and Wednesday's gains, posting a fresh YTD high for the third day in a row
** Brent on course to carve out 6th straight day of gains, having hit an over two week high
** Govvies - EZ yields rise sharply as curves bear steepen, 10yr German yield hits fresh multi-week high but Spain and Italy still underperform. Gilts also smashed
** iTraxx indices start tighter before pushing wider
Market snapshot (14.25 BST)
SXXP -0.60% / SX7P +1.78%
EUR/USD +0.23% at 1.1404
GER 2yr +1.9bps at -0.575% / 10yr +7.9bps at 0.445%
Brent +1.14% at USD47.85
iTraxx Main +0.1 at 54.6 / Crossover +5.2 at 243.2
What to watch Friday
** Data: The spotlight will be on Eurozone CPI for June with estimates centered on a softer print albeit with risk to the upside after German EU Harmonised inflation rose 1.5% YoY versus 1.3% expected and 1.4% previously. France reports CPI before then.
Also watching German unemployment and retail sales figures.
In the UK, final Q1 GDP should match the flash estimate at 0.2% QoQ, while Gfk Consumer Confidence is seen a tad softer in June.
Across the pond, US Personal Income and Spending, PCE Core Deflator and Chicago PMI are on the agenda
** Events: None scheduled
** Supply: Italy plans to sell EUR1-1.5bn 2024 CCTeus and EUR5.5-6.5bn 2022 and 2027 BTPs (10.00)
IGM Credit, IGM FX and Rates
18 Feb 2020
Inside this week’s edition of The Context, Financial Intelligence thought leaders discuss: The JPY Week - Bias is Bearish Has the impact of coronavirus now peaked? We say such talk is premature and an underlying bid Usd/Jpy will continue to slow into 110.00-plus. Euro FIG Snapshot: Virus Protection Fully Operational With the recovery in risk assets extending into a second week, more issuers emerging from blackout and the credit market's virus protection evidently up to date, the pace picked up in the non-covered primary FIG market last week. Equities Ignore, Hope … Euro Indicates Slowing EMU Economy It doesn’t take much to light a fire under equities, but it is going to take much more to push bond yields higher... Read more from The Context and subscribe to have it delivered to your inbox each week!
Topics Industry News
IGM Credit, IGM FX and Rates
By Tim Cheung 18 Feb 2020
The authorities, MOF, PBOC and CBIRC, hosted a joint conference on Feb 7 to provide an update on supportive policies in light of the coronavirus situation. We believe the conference delivered a loosening bias tone as a nimble response to the virus outbreak. Next move following the huge liquidity injection and provision of first batch of special relending funds to more than a dozen of banks is going to be an LPR cut on 20 Feb. We expect a 10bp cut in both 1-year and 5-year LPRs on 20 Feb (chart 1), similar to the magnitude of the latest OMO rate cut. A more sizable cut may mean the policymakers are opting for more aggressive monetary easing to cushion the economic shocks arising from the coronavirus outbreak.
Topics Industry News