The past week has indicated some further positive momentum for corporate bonds and credit spreads have grinded tighter. The most interesting transaction came in the corporate space as Vodafone (L:VOD) issued a total of EUR6bn of bonds with maturities ranging from 3 to 10 years. In the largest corporate issue in EUR for about a year, that attracted a total of EUR13.5bn of orders, Vodafone offered investors both some new issue concessions and the inclusion of a change of control clause.
Positively, the US high yield market has noted its second week in a row of inflows (USD2.7bn). While not huge it is still an indication of investors now seeing value in the US high yield market at current yield levels. The market has also found some new support from the recently rising oil price, which somewhat improves the outlook for the struggling energy and oil sector.
New macro data showed that the Swedish GDP grew by a surprisingly large amount in Q4 2015, with YoY growth at 4.5%. We have previously highlighted the benign outlook for the (Swedish) real estate and construction sectors for 2016 and this supports this view. Retail corporates focused on Sweden such as ICA Gruppen (DBM: BBB) and Lantmännen (DBM: BBB-) should also be beneficiaries. We believe that Lantmännen's SEK Dec 2020 bond is trading at an attractive level.
This week we present a new trade idea on the Nov 2021 4.875% EUR bond issued by Investor AB that appears attractively priced considering Investor's strong financial profile. See separate slide on this trade idea for further information.
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