Headlines
Emerging market turbulence continues adding to the gloom.
DONG Energy equity sale and capital injection approved.
Good start to 2014 with healthy levels of new issue volumes.
Market commentary
Risk aversion continued to be at the top of investors’ minds this week as emerging market jitters continued late this week with a USD10bn Fed tapering and disappointing Chinese PMI falling below the important 50 mark. Scandi credit markets were hit by investors offloading longer maturity corporate bonds, in particular, having entered 2014 with too long exposure. However, credit indices tightened towards the end of the week with the iTraxx Europe trending back towards the 80bp level. Also, the Crossover index tightened albeit under high volatility. Still, risk appetite remains high and new issue spreads remain tight. New issuance volumes stayed at a healthy level with new EUR-denominated corporate issues in January 2014 of EUR27.6bn largely unchanged relative to January 2013.
The long-awaited equity sale of part of the Danish utility DONG Energy to Goldman Sachs and Danish pension funds ATP and PFA was approved by parliament only after an intense political row resulting in the Socialist People’s Party dropping out of government. While the utility is now set to bolster its balance sheet, credit investors were broadly surprised by the political turmoil caused by the transaction.
Issuance activity continued at a healthy pace this week across financials and corporate as liquidity and investor appetite remains high. French telecom operator Orange issued a EUR1.0bn perpetual and in the high-yield segment the ‘BB+’ rated healthcare company Fresenius placed a EUR300m 4% fixed rate 10-year bond at an issue spread of 232bp. Also, National Grid and Volkswagen tapped primary markets, with the latter issuing both a SEK1.0bn bond and a EUR50m short-term note.
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