Danske Research Team
Danske Bank A/S
What’s on our mind
- General credit market news
The strong market tone continued last week. Overall, the iTraxx Main and Crossover tightened by some 1bp and 10bp, respectively.
The strong market sentiment was illustrated by the pan–European FTSeurofirst equity index hitting levels not seen since 2007. According to Reuters, European equity markets have had their best start to the year since 1986 when regional benchmarks began.
The most important events this week are the ECB meeting on Thursday, at which details of the start of the EUR60bn a month bond-buying programme will be discussed, and the US labour market report for February on Friday.
In the Nordic region, issuance last week was low. The only issuer was Swedish SCA, which printed a 5-year EUR300m bond at MS+28bp and a 10-year EUR300m bond at MS +50bp.
Following TDC’s and Total’s issuance of corporate hybrid bonds two weeks ago, last week British firm SSE issued two corporate hybrids (NC5) and (NC7) in EUR and GBP, respectively .
Neste Oil (DBM shadow rating of BBB-) announced plans for a pan- European roadshow. Subject to market conditions, a euro- denominated bond issue may follow.
Buy SSAB EUR 2019s against SSAB SEK 2019s (published 16 Feb)
From a credit perspective, SSAB showed steady progress in its Q4 results despite a slight underperformance versus consensus earnings. Cash flow was not enough to reduce the overall net debt but credit metrics still managed to improve due to a larger LTM adjusted EBITDA.
Credit metrics are, in our view, a little on the weak side for the group’s ‘BB-’ rating, but S&P has built in an improvement in its base- case scenario and, as such, the rating should not be in danger given the strong momentum SSAB is currently seeing.
We expect 2015 to be positive from a credit point of view with improved earnings and further improvements in credit metrics.
The SEK bond trades at bid 97.26 (ASW EUR6m 322bp) and the EUR bond at ask 100.75 (ASW EUR6m 341bp).
The trade provides a pick-up of 19bps with 1.5 months extension, which is attractive, in our view.
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