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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
EURO CORP-Credit spreads tighten, DSGi CDS wider
Reuters: [2008-05-15 17:42:00]
By Natalie Harrison
LONDON, May 15 (Reuters) - The cost of insuring retailer DSG International's debt against default rose on Thursday on disappointment over its turnaround plans, while broader credit spreads edged tighter in thin newsflow.
Five-year credit default swaps on DSGi <DSGI.L> widened by 5 basis points to 335 basis points, a trader said, and was the main standout in the retail sector which was broadly tighter in line with with the rest of the market.
DSGi shares also fell more than 10 percent as analysts warned that efforts by the company -- Europe's biggest specialist electricals retailer -- to cut costs and lower its dividend would not be enough to bolster the group's fortunes [ID:nL1575275].
DSG is currently rated Baa3 by Moody's Investors Service and BBB- by Fitch Ratings, both the lowest notch of investment grade ratings.
"There was no silver bullet in the review, with a turnaround likely to take some time," said Rob Orman, a credit analyst at RBS.
"I think there is a strong chance that at least one agency will cut them to junk in the next couple of weeks."
The cost of insuring Tesco debt against default was resilient however, despite a report from Moody's which said it may cut the UK supermarket's group A1 rating. The rating action cited concerns about Tesco's "weaker than expected credit metrics" and its planned acquisition of 36 discount stores from South Korea's E-Land, announced on Wednesday, Moody's said.
Tesco five-year CDS were 2 basis points tighter at 28 basis points, the trader said.
INFLATION WORRIES
In the wider credit market, the Markit iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was at 419.5 basis points by 1512 GMT, according to data from Markit, 8.5 basis points tighter versus late on Wednesday.
The investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 69.5 basis points, 2.5 basis points tighter.
Geraud Charpin, a credit strategist at UBS, said there was little news driving credit derivative indexes tighter.
"If nothing much is happening, we tend to grind tighter in credit. We're still seeing a trickle of short covering and there is no big negative news, so there is no momentum for people to reset shorts," Charpin said.
U.S. data on Thursday showed softer-than-expected U.S. industrial output for April, which followed a weak manufacturing report from the New York Federal Reserve. Jobless claims also rose slightly more than expected in the latest week.
In Europe, the economic position is still somewhat brighter, however, as strong business investment helped drive German growth. But there are clouds on the horizon, notably weak consumer demand as soaring commodity prices push up the cost of fuel, food and other essentials.
Data earlier this week also showed a shock jump in UK inflation. The Bank of England revised up its inflation forecasts, suggesting there was little scope for further rate cuts, despite predictions of sharply slowing growth or even a recession.
"The inflationary pressures we are seeing make it harder for both the U.S. and Europe to fight against slumping growth. That fear is delaying the economic recovery so it should be seen as a negative," said Charpin.
(Reporting by Natalie Harrison; Editing by Andrew Callus)
((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-Credit spreads stable, bond issuance seen lighter
Reuters: [2008-05-15 10:49:00]
By Maya Thatcher
LONDON, May 15 (Reuters) - European credit spreads held up well on Thursday amid thin news flows, even after British bank Barclays <BARC.L> said its first-quarter profits were down.
By 0835 GMT, the Markit investment-grade iTraxx Europe index <ITRAC5EA=GFI> was unchanged at 72 basis points, according to Markit data, versus late on Wednesday.
The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 0.75 basis points wider at 428.75 basis points.
"We are unchanged from yesterday. Markets are pretty stable," a London-based trader said.
Barclays did not disclose the amount its first-quarter profit fell by and refused to rule out a rights issue following a 1 billion pound ($1.95 billion) writedown. [ID:nL15355889]
That had little impact on the cost of insuring Barclays debt against default. Five-year credit default swaps on Barclays were 1 basis point wider at 66 basis points, the trader said.
Traders said they had been expecting the news and were not surprised by the market's muted response.
"Everything is so well flagged these days ... it's all discussed days in advanced, and the market's prepared for it. There's no big surprise," the first trader said.
Shares in the company were down nearly 2 percent.
"This cannot be the end of the story here given the group's ambitious growth plans ... our bet remains a private placement of some sort," credit strategists at RBS wrote in a note to clients.
"Until we see positive action regarding capital and a few more marks on the riskier items held on balance sheet we would expect to see CDS leak wider versus the index."
In data from the U.S., possible market movers include jobless claims, the Philadelphia Fed business index and April industrial production. [ECI/US]
BOND ISSUANCE
A major talking point among traders and strategists was Wednesday's flood of primary market issuance, including large bond sales from France Telecom <FTE.PA>, consumer goods maker Unilever <ULVR.L> and German carmaker Daimler <DAIGn.DE>.
"If the primary markets are anything to go by then the worst of the crisis is certainly behind us as the euro credit market swallowed a barrage of supply in euro corporates that it has not been exposed to for a long time," credit strategists at ING wrote in a note to clients.
But the trader said bond issuance on Thursday would likely be slacker than the previous session.
"Less today. A lot of the big ones are been and done now. So that's it for three months for those guys," the trader said.
In the cash bond market, the FTSE Euro Corporate Bond Index <EUCRAVSPG=> showed investment-grade corporate bonds in euros yielding an average 110.4 basis points more than similarly dated government bonds, 1.3 basis points less on the day.
In underlying government bond markets, the yield on the interest rate sensitive two-year Schatz <EU2YT=RR> was 3.986 percent, 7.8 basis points more on the day. The 10-year Bund <EU10YT=RR> yielded 4.226 percent, 5.4 basis points more.
The 10-year euro swap rate <EURAB6L10Y=> was 4.657 percent. (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
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