Summary

    • Secondary spreads drift slightly wider
    • Primary market activity continues at a very high level
    • S&P issues comment on Nordic banks
    • iTraxx roll on Monday

    Headlines from the credit market this week

    This week’s credit spreads have been travelling sideways, ending the week with widening. At the start of the week, the market was aided by S&P removing its negative watch on Greece. Later in the week, Germany suggested that an IMF solution in Greece might be preferred, signalling further disagreement in the EU about a rescue package.This, combined with mixed macro numbers, has offset the feel good factor we saw at the start of the week, causing modest widenings. iTraxx Europe widened by a single basis point to 76bp while Crossover widened by 7bp to 418bp. A heavy continuous flow of primary issuance also causes secondary cash spreads to continue to drift slightly wider, as investors conserve their cash for further primary supply.

    Even though the secondary market has resided a bit, the primary market is still very much alive and kicking. Following the trend of the past couple of weeks, we have seen issues from a broad palette of various issuers, with mixed performance in the aftermarket. We continue to fear that further issuance will weigh even further on secondary spreads. This week offered an interesting inaugural issuance by Danish Windmill producer, Vestas, which came to the market without a rating at MS+225 with good secondary performance of 8bp. Another interesting issuer this week was Nordea with a 10Y EUR1bn LT2 issue. We are somewhat puzzled as to why Nordea chose to issue in the LT2 space, as regulation going forward points to no capital relief for LT2 on the balance sheet. The bond was issued without the traditional call-feature. Compared with other outstanding LT2s, the bond came at a tight level of MS+123bp, signalling a high appetite for Nordea, being a rare issuer.