IGM Credit, IGM FX and Rates
23 Nov 2020
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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
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