Weekly Credit Update: European Credit Indices Grind Tighter

Activity in Nordic local currency markets is good.

S&P takes positive rating action on European corporates.

Danish government proposal to alleviate mortgage bond refinancing risk is finalised.

Market commentary
European credit indices have continued to grind tighter in a week with generally limited newsflow. However, on the new issuance front, the Nordic local currency bond markets have seen high activity, as several companies in both the investment grade and high yield areas were taking advantage of the still benign market conditions ahead of the expected slowdown in December to bring new issuance to the market. The Swedish aerospace and defence company Saab (‘BBB+’ rating from Danske Credit Research) issued a total of SEK1bn in five-year bonds, split into a fixed rate tranche of SEK250m and a floating rate tranche of SEK750m. In the high yield space, the Danish IT company EG Group (‘B’ rating from Danske Credit Research) did a DKK900m seven-year secured FRN at 3M Cibor+650bp.

Among financials, following the successful EUR1bn issuance in October, Danske Bank issued new fully Basel III compliant Tier 2 bonds in three currencies and maturities from 10 to 12 years – with an option to prepay the bonds at par five years prior to their final maturities – with a total value of DKK5.55bn. The bonds were split into five different tranches and by currency with values of DKK2.85bn, SEK2.5bn and NOK700m.

The large variety of issuance from both corporate and banks in the Nordic local currency markets this week is a good example of how rapidly the investor base in these markets has broadened over the past year alone. The increased depth makes the Nordic local currency markets increasingly attractive for issuers across the rating spectrum that seek to diversify their funding and extend debt maturity profiles. Elsewhere, after the robust issuance of the past few weeks, the euro market saw a certain slowdown in investment grade issuance this week ahead of the Thanksgiving holiday in the US.

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