Large spread to the ‘BBB-’ industrial curve and EUR bonds

Danske Research Team Danske Bank A/S

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 high demand. However, iTraxx Main widened 6bp over the week, while iTraxx Crossover widened 25bp. We expect the coming period to become more volatile with the UK referendum approaching along with the normal summer slowdown.
Moody's has downgraded Finland from Aaa/S to Aa1/S due to ‘the significant economic challenges facing the Finnish economy'. We note that despite the downgrade this will, in our view, not lead to any rating action on Fingrid, Fortum, OP Corporate Bank, Aktia or Sampo plc despite these companies receiving one additional notch due to government support.
The Swedish FSA has commented on the Swedish MREL proposal, stating that it generally believes the proposal could cause a refinancing risk for Swedish banks. The FSA believes the MREL level should be lower than the suggested double-the-totalcapital- requirement level (SREP), should skip the automatic link to capital requirements and, finally, should consist less of debt and more of own funds. We expect the National Debt Office to take these comments into consideration. Along with the comments on the MREL proposal, the FSA once again stated its concerns about the Swedish government's proposed changes to tax deductibility for interest expenses on certain sub-debt and the current limitations for Swedish banks actually to start issuing subordinated senior debt (Tier 3) due to the documentation.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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