More volatility expected due to UK referendum

What's on our minds

- General credit market news

New issuances were high on the agenda last week as many issuers took advantage of the benign markets. In the Nordic space we saw issuances from, among others, Hoist Kredit with its inaugural EMTN transaction of a three-year EUR250m senior unsecured at ASW+322bp, and HeidelbergCement with an eightyear EUR750msenior unsecured at ASW+205bp.
Of the expected upcoming issuances, Nykredit's announcement of an EUR500m ‘Senior Resolution Note' will be of special interest to us, as it is one of the very first issuances of contractual subordinated senior bonds in the European market – one that is expected to grow to several hundred billion euros in coming years as a result of the upcoming Total Loss-Absorbing Capacity (TLAC) requirement due in 2019. For Nykredit, the driver is not the TLAC, as this is only for the world's largest banks, but the S&P's ALAC requirement, which is similar to TLAC in many ways.
In the secondary market activity was more subdued, as new issuances took much investor focus but with a generally positive tone; iTraxx Main narrowed 8bp and iTraxx Crossover 28bp.
The coming period is expected to become more volatile with the UK referendum approaching along with the normal summer slowdown. Added to this is the increased probability of a Fed hike even in June or July as a result of the speech given by Janet Yellen on Friday last week. We continue to forecast the next Fed hike for September.
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