EURO CORP-Bond sales lift sentiment; spreads tighten

Reuters: [2008-05-14 18:05:00]

By Maya Thatcher

LONDON, May 14 (Reuters) - A wave of bond issuance kept the credit market busy on Wednesday, as issuers took advantage of tightened credit spreads in Europe following a rise in equities and softer-than-expected U.S. inflation data.

"It's very busy on the primary side, and the market is buoyant -- equities are rallying, credit coming back, life is good, the sun is shining in London," a trader said.

"The primary market is performing well, so there's this good mood in the market," the trader said.

By 1537 GMT, the Markit investment-grade iTraxx Europe index <ITRAC5EA=GFI> was at 71.75 basis points, according to Markit data, 2.25 basis points tighter versus late on Tuesday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 13.5 basis points tighter at 426.5 basis points.

"The market feels better because equities are doing all right, so across the board there's some tightening momentum," a second London-based trader said.

The FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.59 percent. Across the Atlantic, the Dow Jones industrial average <.DJI> and the Nasdaq Composite Index <.IXIC> climbed nearly 1 percent.

FEELGOOD FACTOR

Heavy activity in bond issuance gave markets a feelgood factor, with new deals from France Telecom <FTE.PA> automaker Daimler <DAIGn.DE> and consumer goods maker Unilever <ULVR.L>.

France Telecom sold both parts of its dual-tranche euro bond at the tight end of guidance, suggesting good demand.

The six-year, 750 million euro ($1.16 billion) tranche priced at mid-swaps plus 90 basis points. Guidance had been set at around 95 basis points over mid-swaps before being refined to 90-92 basis points over mid-swaps.

Guidance for the 10-year, 1.25 billion euro tranche was also cut ahead of the bond being sold.

The bond priced at mid-swaps plus 110 basis points. This is down from earlier indications of around 115 basis points over mid-swaps, and a subsequent refinement to 110-112 basis points.

Five-year credit default swaps on France Telecom, Europe's third-largest telecoms operator by market value, were slightly narrower on the bond, tightening 2.5 basis points to 78 basis points, according to Markit data.

German automaker Daimler priced a four-year, fixed-rate euro benchmark bond at mid-swaps plus 65 basis points, an official at one of the banks managing the sale said.

BNP Paribas, HSBC and UniCredit were joint lead managers on the bond sale.

Unilever, which makes Dove soap, Sunsilk shampoo and Knorr soups, tapped the primary market by selling a 750 million euro, five-year bond at 48 basis points over mid-swaps.

(Reporting by Maya Thatcher; editing by David Hulmes) ((maya.thatcher@reuters.com; +44 207 542 9202; Reuters Messaging: maya.thatcher.reuters.com@reuters.net))

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Keywords: MARKETS BONDS EUROCORP

EURO CORP-Spreads tighter, corporate issuance continues

Reuters: [2008-05-14 10:39:00]

By Richard Barley

LONDON, May 14 (Reuters) - European credit spreads tightened early on Wednesday as European equity markets gained and new bond sales gathered pace, though traders and investors were nervously eyeing the release of U.S. inflation data later in the session.

By 0815 GMT, the investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 74 basis points, according to Markit data, 1 basis point tighter than late on Tuesday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 5 basis points tighter at 435 basis points.

Credit spreads have been supported this week by a growing feeling that the worst of the financial crisis may have passed, as well as continuing signs of good demand for new bond sales. Luxury carmaker BMW <BMWG.DE> racked up orders of 4 billion euros on Tuesday for a 1.75 billion euro bond sale.

"It looks like we're seeing some stability between 70 and 80 (basis points on iTraxx Europe)," said a trader, noting that the market was welcoming this after some extreme spread moves in recent months. "We have been volatile for nearly a year now."

The tightening came even amid renewed pressure on the U.S. monoline insurers, which have guaranteed billions of dollars worth of structured finance. Moody's Investors Service said on Tuesday that losses for residential mortgage debt were worse than it expected and may hurt the capitalisation levels of MBIA Inc <MBI.N> and Ambac Financial Group Inc. <ABK.N>.

Following surprisingly high inflation reported in the UK on Tuesday, too, there are some nerves around the release of U.S. consumer price data later on Wednesday, analysts said.

CORPORATE ISSUANCE CONTINUES

France Telecom <FTE.PA> on Wednesday joined the growing list of corporate borrowers to have tapped the market in recent weeks, unveiling plans for a two-part benchmark bond.

The sale will be split into six-year and 10-year tranches, an official at one of the banks managing the sale said.

The news pushed spreads on telecoms credit default swaps around 1 basis point wider, the trader said.

Also in the market is carmaker Daimler <DAIGn.DE>, with plans for a four-year euro benchmark bond, a source familiar with the sale said.

Meanwhile, continuing a trend for use of alternatives to the public bond markets, mobile phone group Vodafone Group Plc <VOD.L> hired banks for a German Schuldschein private placement.

In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 112 basis points more than similarly dated government bonds, 0.5 basis points more on the day.

In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz <EU2YT=RR> was 3.879 percent, 5.6 basis points more on the day. The 10-year Bund <EU10YT=RR> yielded 4.148 percent, 5.4 basis points more.

The 10-year euro swap rate <EURAB6L10Y=> was 4.577 percent. (Reporting by Richard Barley, editing by Will Waterman) ((richard.barley@reuters.com; +44 20 7542 7770; Reuters Messaging: richard.barley.reuters.com@reuters.net))

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Keywords: MARKETS BONDS EUROCORP

EURO CORP-Credit spreads open tighter; U.S. CPI eyed

Reuters: [2008-05-14 08:54:00]

LONDON, May 14 (Reuters) - European credit spreads tightened early on Wednesday, although the move lacked any real impetus, with investors eyeing a raft of European earnings reports and U.S. inflation data due later in the session.

By 0645 GMT, the investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 73.25 basis points, according to Markit data, 1.75 basis points tighter versus late on Tuesday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 6 basis points tighter at 434 basis points.

A trader said the market had been encouraged in recent sessions by efforts by banks to raise fresh capital and restore balance sheets battered by the subprime crisis. "That's making people a little bit more comfortable," he said.

Markets have also been encouraged by the appetite among investors for new bond sales, he said.

However, the tone could yet be disrupted by macroeconomic data, strategists at Deutsche Bank warned, particularly after a steep rise in UK inflation reported on Tuesday.

"If the U.S. saw a leap up in inflation anything like that seen in the UK yesterday then markets would likely take a very sharp lurch lower," they wrote in a note to clients. "However, this is not expected today, but then again neither was the UK number so there will be some prior trepidation."

Headline inflation as measured by the consumer price index probably rose 0.3 percent in April versus March, according to the median forecast in a Reuters survey. Core CPI, which excludes volatile food and energy prices, probably rose 0.2 percent.

(Reporting by Richard Barley; editing by Sue Thomas)

((richard.barley@reuters.com; +44 20 7542 7770; Reuters Messaging rm://richard.barley.reuters.com@reuters.net))

Keywords: MARKETS BONDS EUROCORP

EURO CORP-Credit spreads tighter; strong primary buoys market

Reuters: [2008-05-13 18:06:00]

By Richard Barley

LONDON, May 13 (Reuters) - European credit spreads tightened on Tuesday, with strong demand for new bond issues buoying sentiment even as concerns about inflation resurfaced and equity markets painted a mixed picture.

By 1525 GMT, the investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 75 basis points, according to Markit data, 0.75 basis points tighter versus late on Monday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 1 basis point tighter at 440 basis points.

Spreads moved back from early gains after UK government data showed inflation rising by its biggest amount in nearly six years to 3 percent.

U.S. retail sales data came in much stronger than expected, boosting hopes the U.S. consumer will prove resilient. But retail giant Wal-Mart Stores Inc <WMT.N> then darkened the mood again with a cautious outlook.

"It is a little bit surprising to end the day tighter, in my opinion, because of that backdrop of newsflow," said Jeroen van den Broek, a credit strategist at ING.

"The primary market once again has helped boost sentiment a little, with the very strong reception for the BMW transaction which doesn't have too high a new issue premium," he said. "It's still done pretty well and the size is fairly large."

BMW <BMWG.DE>, via BMW US Capital LLC, sold a 1.75 billion euro ($2.71 billion), 7-year bond on Wednesday at 70 basis points over mid-swaps, a concession of just 10 basis points to credit default swaps on the premium automaker.

Order books for the bond closed at more than 4 billion euros, an official at one of the banks managing the sale said.

UK insurer Aviva <AV.L> also got a warm reception, being able to cut spread guidance on a two-part euro and sterling bond sale.

However, the natural path for credit spreads may still be wider, Van den Broek warned, with a return to triple-digit spreads on the iTraxx Europe a possibility.

Many analysts argue that while the worst of the financial system crisis may have passed, problems in the real economy are only beginning to be felt.

Among single names, spreads moved largely in line with the indexes, according to data from Markit, tightening gently.

Five-year default swaps on Credit Agricole <CAGR.PA> were little changed at around 62 basis points after it announced a 5.9 billion euro rights issue due to further writedowns at its Calyon investment banking arm.

CDS on Alliance & Leicester <ALLL.L>, too, were broadly flat at 145 basis points after it revealed further writedowns.

In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 111.5 basis points more than similarly dated government bonds, 2.2 basis points less on the day. (Reporting by Richard Barley; editing by David Hulmes)

((richard.barley@reuters.com; +44 20 7542 7770; Reuters Messaging rm://richard.barley.reuters.com@reuters.net))

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($1=.6469 Euro)

Keywords: MARKETS BONDS EUROCORP

EURO CORP-Credit spreads tighter; Wal-Mart, retail sales eyed

Reuters: [2008-05-13 10:42:00]

By Natalie Harrison

LONDON, May 13 (Reuters) - European credit spreads tightened on Tuesday, helped by rising equities and a smaller-than-expected drop in profits at French bank Societe Generale <SOGN.PA>.

German premium carmaker BMW <BMWG.DE> was also in the spotlight, with plans to sell a seven-year euro benchmark bond via a U.S. unit [ID:nL13892248], following a strong supply of new corporate bond deals over the past few weeks.

By 0817 GMT, the investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 73.75 basis points, according to Markit data, 2 basis points tighter versus late Monday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 435 basis points, 6 basis points tighter.

Both indexes have retraced about a third of the losses recorded last week -- on worries spreads had tightened too aggressively -- in just the past two days.

"There isn't much going on. I haven't seen anything that I would consider main news today, it just feels very quiet, and with some of Europe shut yesterday people are probably still on holiday," a trader said.

U.S. retail sales were due at 1230 GMT, and will indicate how consumer spending fared in April. U.S. retailer Wal-Mart <WMT.N> is also due to report first-quarter earnings before the U.S. market opens.

"Wal-Mart seems to be benefiting from the switch to lower cost retailing so there could be some good news in the sector," said Jim Reid, a credit strategist at Deutsche Bank.

Inflation data in the UK, euro zone and United States during the week will also be key.

Credit strategists at UniCredit (HVB) said the credit crisis was not over but was "changing character".

"There are still many potential threats for credits," said UniCredit's Jochen Felsenheimer. "The crisis is slowly spilling over from banks to non-banks. This might take some time but will finally cause the famous "third leg" of the spread widening".

One of the biggest fears amongst analysts is the risk of a severe U.S. recession, especially at a time global inflationary pressures are building and oil hovers close to record highs well above $120 a barrel.

"The more dramatic threats for the market are spillover effects onto the real economy," said Felsenheimer.

FINANCIALS REPORT

On the results front, Societe Generale reported a 23.4 percent fall in first-quarter net profit, but even so, earnings came in above the average market forecast [ID:nL13372800].

Five-year credit default swaps on Societe Generale were 2 basis points tighter at 50 basis points, a second trader said.

Elsewhere, British bank Alliance & Leicester <ALLL.L> took a 192 million pound ($376 million) hit to profit from assets tarnished by the credit crunch. That took its profit in the first four months below 2007 levels [ID:nL13431762].

In a trading update on Tuesday, Britain's seventh-largest bank said 139 million pounds of that hit came from its structured debt investments, with the remainder from changes in the fair value of its treasury investments.

Its shares fell more than 5 percent but the second dealer said there were no trades in the bank's illiquid bonds or CDS.

In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 114.3 basis points more than similarly dated government bonds, 0.8 basis points higher on the day.

In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz <EU2YT=RR> was 3.712 percent, 1.0 basis points up on the day. The 10-year Bund <EU10YT=RR> yielded 4.002 percent, 0.9 basis points lower.

The 10-year euro swap rate <EURAB6L10Y=> was 4.455 percent.

(Reporting by Natalie Harrison; editing by Rory Channing)

((natalie.harrison@reuters.com; +44 207 542 2687; Reuters Messaging: natalie.harrison.reuters.com@reuters.net))

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Keywords: rcMARKETS BONDS EUROCORP