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EURO CORP-Credit spreads tighten, Lafarge sells 2-part bond
Reuters: [2008-05-19 17:21:00]
By Natalie Harrison
LONDON, May 19 (Reuters) - French cement maker Lafarge brought a two-part euro bond sale to the market on Monday, as credit spreads tightened further despite continued debate about whether the credit crisis was over the worst.
By 1503 GMT, the Markit iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 401 basis points according to data from Markit, 14 basis points tighter versus late on Friday.
The investment-grade iTraxx Europe index <ITRAC5EA=GFI> was at 66 basis points, 2 basis points tighter.
"We're tighter in the absence of any big news and credit is using stocks as a guide of where to go, although volumes are light there as well. We're definitely heading into the (quiet) summer," a trader said.
Credit spreads have staged a strong rally since the cut-price sale of Bear Stearns <BSC.N> in March, but uncertainty is growing as to whether the tightening has been overdone, with some strategists surprised by how long the rally has lasted.
European Central Bank President Jean-Claude Trichet warned on Monday the end of the credit crunch was not in sight and that the world was experiencing an "ongoing and very significant market correction".
"I think what Trichet said is probably true. I think U.S. politicians have an incentive to say the worst is over as there is an election coming up," the trader said.
"I don't think the market really believes the worst is over, apart from in financials maybe. But I do think we are going to have to wait for the third quarter before we start to see a bigger impact on the consumer and corporates."
Some fund managers remain relatively upbeat, however.
James Gledhill, head of fixed income at New Star Asset Management, for example, said financial bonds still offer good value.
"We're pretty positive about credit spreads and we think we can perform well," said Gledhill on a teleconference on Monday.
"But I would not want people to get the message that we are blinkered, with rose-tinted glasses, and think the economy is going to be perfect from now on.
"We think we are going to see a weak economy but, because of how weak credit has been, even in that environment we think credit can perform."
In terms of data on Monday, the Conference Board's Leading Economic Indicators showed the U.S. economy was weak but has sidestepped a recession. The news helped lift U.S. stocks as fears about the economic outlook eased.
Other key data this week includes Germany's ZEW economic sentiment index on Tuesday and the Ifo index of German business sentiment on Wednesday [ECI/EURO].
In the U.S., the highlights in a relatively quiet week for economic releases are the producer price index on Tuesday and existing home sales on Friday [ECI/US].
Elsewhere on Monday, the primary market saw a new bond sale from Lafarge.
The French company set final guidance on a 750 million euro ($1.17 billion), three-year bond at mid-swaps plus 125 basis points, and a seven-year bond of the same size at mid-swaps plus 170 basis points [ID:nL1961991]. (Reporting by Natalie Harrison; editing by David Hulmes)
((natalie.harrison@reuters.com; +44 207 542 2687; Reuters Messaging: natalie.harrison.reuters.com@reuters.net))
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Keywords: MARKETS BONDS EUROCORP
EURO CORP-Spreads pare gains, track U.S. stock futures
Reuters: [2008-05-19 10:37:00]
By Richard Barley
LONDON, May 19 (Reuters) - European credit spreads pared early gains as U.S. stock futures turned negative and debate persisted over whether the credit crisis was drawing to a conclusion.
By 0750 GMT, the investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 67.75 basis points, according to data from Markit, 0.25 basis points tighter than late Friday.
The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 411 basis points, 4 basis points tighter.
The indexes rallied throughout last week, returning close to the lows for the current series 9 iTraxx contracts, as U.S. economic data came in mostly better than expected .
"We're slightly wider from the open now," said a trader in London. "We're tracking futures."
Analysts were split on the path of spreads.
"We see little to reverse the current tightening trend in the week ahead," Suki Mann, credit strategist at SG CIB, wrote in a note to clients. "The European earnings season is winding down, and while the primary pipeline still looks solid, we do not think supply will derail the credit markets.
"Protection is oversold -- but not as oversold as it was at the beginning of Q4 last year. So we suspect the main contracts can continue to tighten in the week ahead."
Strategists at UniCredit (HVB) acknowledged that the recent recovery in credit derivatives markets had lasted longer than they expected, but warned that predictions of the end of the credit crisis could yet be premature.
"A disappointment on the macro front is the most obvious potential source of further adversity for credit markets," wrote Jochen Felsenheimer, head of credit strategy. "The latest improvement of sentiment looks to us as wishful thinking rather than marking the spread reversal in credit markets."
He advised investors to consider increasing short positions with the iTraxx indexes at these levels or to buy both cash bonds and credit protection -- a so-called negative basis trade.
Jean-Claude Trichet, president of the European Central Bank, warned on Monday that the world was experiencing an "ongoing and very significant market correction".
In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 111.2 basis points more than similarly dated government bonds, 0.6 basis points less on the day.
In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz <EU2YT=RR> was 3.966 percent, 2.8 basis points less on the day. The 10-year Bund <EU10YT=RR> yielded 4.165 percent, 1.3 basis points less.
The 10-year euro swap rate <EURAB6L10Y=> was 4.577 percent.
(editing by Elizabeth Fullerton) ((richard.barley@thomsonreuters.com; +44 20 7542 7770; Reuters Messaging rm://richard.barley.reuters.com@reuters.net))
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Keywords: MARKETS BONDS EUROCORP
EURO CORP-Spreads tighter but fade on poor U.S. sentiment
Reuters: [2008-05-16 17:22:00]
By Richard Barley
LONDON, May 16 (Reuters) - European credit spreads tightened on Friday, buoyed by European equities, although they pared some of the move after U.S. consumer sentiment data from the University of Michigan came in weaker than expected.
The benchmark iTraxx indexes have been moving tighter throughout the week, reversing the widening seen last week, as the focus has moved more to new corporate bond sales that have been broadly well received, bringing support to the market.
By 1515 GMT, the Markit iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 413 basis points, according to data from Markit, 7 basis points tighter versus late on Thursday.
The investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 68 basis points, 2 basis points tighter.
The indexes had earlier been indicated as low as 404 basis points and 65.5 basis points, respectively, but weakened late in the session after U.S. consumer confidence tumbled to its lowest in 28 years this month. [ID:nN16404511]
Traders said there was little activity in the market on Friday, with investors perhaps focused on digesting the heavy flow of supply this week, including sizeable deals from BMW <BMWG.DE>, France Telecom <FTE.PA> and Daimler <DAIGn.DE>.
"The new issue window, largely shut in Q1, exploded in April and May as investors sensed stability was returning to the markets," strategists at BNP Paribas said in a note to clients. "Stable market conditions will keep the primary pipeline busy, given the large backlog of financing required due to M&A activity."
"The good news is that investment-grade markets are still open."
BA, ICELANDIC BANK CDS RALLY
Among single names, CDS on British Airways <BAY.L> fell 20 basis points to 301 basis points after it released results that pushed its shares up nearly 4.5 percent.
BA said profits rose 45 percent, allowing it to pay its first dividend since 2001, but warned that the year could be turbulent with fuel costs set to rise 1 billion pounds.
The cost of insuring Icelandic banks' debt against default fell sharply on Friday after the Swedish, Danish and Norwegian central banks agreed a swap facility with Iceland.
Five-year credit default swaps on the banks fell by some 40-50 basis points, with Kaupthing <KAUP.IC> indicated around 425 basis points, Glitnir <GLB.IC> around 380 basis points and Landsbanki <LAIS.IC> around 220 basis points.
The Swedish central bank said the facility was aimed at supporting the Icelandic central bank in its task of safeguarding economic and financial stability.
In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 111.8 basis points more than similarly dated government bonds, 0.6 basis points more on the day. (Reporting by Richard Barley; editing by Sue Thomas)
((richard.barley@thomsonreuters.com; +44 20 7542 7770; Reuters Messaging rm://richard.barley.reuters.com@reuters.net))
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Keywords: MARKETS BONDS EUROCORP
Keywords: MARKETS BONDS EUROCORP = 2
EURO CORP-Credit spreads track rally in share markets
Reuters: [2008-05-16 11:07:00]
LONDON, May 16 (Reuters) - European credit spreads tightened on Friday, lifted by a rally in share markets, as easing concerns about corporate earnings outweighed Thursday's negative economic data.
By 0924 GMT, the Markit iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 407 basis points, according to data from Markit, 13 basis points tigher versus late on Thursday.
The investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 66.75 basis points, 3.25 basis points tighter.
European shares rose, with gains in pharmaceutical and oil shares, following a rally in the United States that pushed the S&P 500 index <.SPX> to its highest close since the first week of January.
"The underlying picture, away from financials, hasn't deteriorated as badly as people's fears," said the head of credit research at a bank.
Tech shares accounted for much of the market gain, and retailers also gave a boost to the U.S. market after JC Penney Co. Inc. <JCP.N> said its earnings for the current quarter could exceed analysts' forecasts.
"That tells you the U.S. consumer is not dead," the analyst said. Even so, he expected the financial crisis to inflict more damage on corporate earnings in the U.S. and Europe later this year.
The VIX index <.VIX>, or 'fear gauge', which measures projected volatility based on near-term option prices on the S&P 500 and is often seen as a leading indicator for credit, fell to a 7-month low.
On the economic data front, U.S. industrial production and capacity utilitsation came in weaker than expected for April. A New York Federal Reserve report also showed manufacturing weak, and initial jobless claims in the latest week rose slightly more than expected.
"With April growth starting out on a very weak note and inflationary concerns increasing, the U.S. seems to be entering a stagflationary phase, albeit of a modest kind," analysts at BNP Paribas wrote in a note to investors.
In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 111.0 basis points more than similarly dated government bonds, 0.18 basis points less on the day.
In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz <EU2YT=RR> was 3.988 percent, 1.6 basis points less on the day. The 10-year Bund <EU10YT=RR> yielded 4.203 percent, 0.4 basis points less.
The 10-year euro swap rate <EURAB6L10Y=> was 4.611 percent. (Editing by Louise Ireland) ((jane.baird@reuters.com; +44 207 542 2471; Reuters Messaging: jane.baird.reuters.com@reuters.net))
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Keywords: MARKETS BONDS EUROCORP
EURO CORP-Credit spreads tighten as share markets rise
Reuters: [2008-05-16 08:52:00]
LONDON, May 16 (Reuters) - European credit spreads tightened on Friday after gains in U.S. stocks pushed the S&P 500 <.SPX> to its highest close since the first week of January, and the VIX index <.VIX> of equity volatility fell to a seven-month low.
By 0743 GMT, the Markit iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 407.5 basis points, according to data from Markit, 12.5 basis points tighter versus late on Thursday.
The investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 66.75 basis points, 3.25 basis points tighter.
European credit indexes were following stock markets, a trader said. European shares were also expected to make gains after a rally in U.S. tech stocks late on Thursday.
The VIX, which measures projected volatility in the U.S. share market based on near-term option prices on the S&P 500, fell to 16.3. The main barometer of fear in the market, the index is often seen as a leading indicator for credit. It reached highs above 35 in January and mid-March.
(Reporting by Jane Baird; Editing by Quentin Bryar) ((jane.baird@reuters.com; +44 207 542 2471; Reuters Messaging: jane.baird.reuters.com@reuters.net))
Keywords: MARKETS BONDS EUROCORP
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