Danske Research Team
Danske Bank A/S
What’s on our mind
- General credit market news
European credit indices ended the week a tad wider on the back of worrying signs from Greece that a default on the IMF-payment in June could be approaching. The iTraxx Main and Crossover-index ended the week with spreads of 61bp and 279bp, respectively.
The volatility in long dated interest rates continued, with 10 year bund yields opening the week at around 56bp, widening to 66bp to close around 60bp. However, the peak rates were lower than past weeks.
Our macro house view is that the euro area recovery is taking a breather as the boost from oil fades. US recovery looks imminent as also witnessed by last week’s US core CPI increase. Tentative signs of bottoming in China. Moderate gains in stocks in coming months. Bond yields heading moderately higher as Fed hike draws closer. EUR/USD to go lower.
Despite volatile underlying rates, the Nordic secondary IG credit markets remained constructive, with decent trading flows over the past week. The story is different for the Nordic HY market, where the secondary markets are very illiquid and technical despite an active primary market.
The event risk to spreads (and the EUR credit market) is a possible uncontrolled Greek default and/or exit from the euro and to a lesser extent other possible credit events, such as a rating downgrade of France and/or other European countries.
Despite the rate volatility, there were a handful of deals printed, including EUR150m by Technopolis, NOK700m by Color Group, EUR750m by Swedbank, SEK1bn by DnB bank and EUR250m by Ålandsbanken. We expect further IG and HY issuance short term.
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