RTRS:EURO BONDS- Tighter start ahead of Fed and MPC
LONDON, Sept 21 (IFR) - European credit markets are beginning the London trading session on a marginally tighter footing, continuing the moves from yesterday. As of 06.40GMT according to Tradeweb, the iTraxx Main Series 16 index was 2.5bp tighter at 183.5, the HiVol index was 3bp tighter at 252 and the Crossover index was 8bp tighter at 787.
The main event of the day will take place after European markets have headed off for the evening when the two day FOMC meeting ends and the statement is released at 18.15GMT. Since Chairman Bernanke announced that the Fed would stretch its September meeting to two days, speculation has been rife that it was to give the Committee time to chew over and commit to some form of further easing. Though three hawks dissented from the rather mild form of easing enacted at the last meeting (guidance saying that rates would be "exceptionally low" through mid-2013 on the current trajectory), the doves still have the numbers to overcome them, and further easing is widely expected. A reimagined Operation Twist, where the Fed sells short dated Treasuries to buy longer dated maturities is the most likely outcome.
None of that should, however, dictate direction today. Once again proceedings are likely to be driven by the ongoing negotiations between the Greek Finance Ministry and the Troika. The prolonged nature of the talks between the two is beginning to be the cause of some concern, although a Greek official has already said this morning that the Greek government will announce the new measures later today. While the Greek's are keen to state that the talks are on track, there are reports in the Greek press that the Troika will return to Athens in early October to complete its fifth review and decide whether to release the next tranche of bailout cash. That would be cutting things fine to meet the coupon payments on the October 2019 and 2022 GGB's, and that uncertainty will almost certainly prey on a frayed market's nerves further.
Meanwhile in Italy, in the aftermath of yesterday's surprise downgrade by S&P and in anticipation of a similar move by Moody's next month, the finance ministry is drawing up new reforms designed to lift the sovereigns slowing economy. Those moves are likely to pave the way for more privatisations, primarily of utilities owned by local authorities. In the wake if yesterday's S&P move, 5yr CDS printed a record wide of 520bp, while 10yr cash yields traded back to 5.75% before both recovered somewhat.
On the global economy front, the IMF MF downgraded their projections for global growth in its revised World Economic Outlook, which given the numbers coming out of the US and Europe should have come as little surprise to anybody.
With that in mind, this morning's MPC minutes from the Bank of England should make interesting reading. The expectations are that the committee will have voted to keep rates on hold for now, the conversations over a further GBP50-100bn worth of QE may see Miles joining Posen in calling for an extension of the APF.
Aside from the Fed it's yet another quiet data session on both sides of the Atlantic. In the US there is only August Existing Home Sales to contend with, which is expected at 4,650k versus 4,670k. In Europe the only major release comes from the UK in the form of Public Sector Net Borrowing at 08.30GMT.
On the supply front we get some appetite for core paper when the German Finance Ministry taps the current benchmark Bund, DBR2.25% September 2021 to the tune of EUR5bn. The issue looks to offer some value versus the previous benchmark on an RV basis, and the ongoing flight to quality trade should also be supportive to the auction process. PRIMARY MARKET:
Early volatility capped any insignificant European initiatives, leaving just a couple of SSA floater taps and some CHF action for the market to be going on with.
KBN upped a Mar 2014 dollar deal by USD300m to USD800m at the tight end of 3mL+7/+8 guidance, and EIB increased its Jan 2017 ECOOP by EUR250m in line with talk at 3mE+11, taking the Jul 2009 original up to EUR2bn.
Swiss industrial ABB headed the CHFs, a two-tranche 5yr and 10yr outing for a combined CHF850m. The CHF500m 5yr priced at MS+50, and the CHF350m 10yr at +80, both in line with respective guidance. Landshypotek provided more modest supply in the currency, selling a CHF200m 7yr covered, again in line with talk at MS+30. Full details of all the day's pricings on Reuters page TGM17522, Bloomberg TG17522, or here on IFR Markets.com. For the pipeline of upcoming deals see Reuters TGM17546, Bloomberg TG17546, or here on IFR Markets.com. EARLY NEWS: > National Bank of Canada said on Tuesday it agreed to buy HSBC's Canadian retail brokerage for CAD206m in cash as it expands its Canadian wealth management offerings. > UBS chief confident of board support despite loss. > UniCredit says no cap hike decision yet, CEO Federico Ghizzoni says liquidity stable, no U.S. dollar funding problems, considering all options to boost capital and is not aware of internal discontent with his performance. > The Lloyd's of London insurance market crashed to a first-half loss of GBP697m (USD1bn), weighed down by record claims from natural catastrophes including the March 11 Japanese earthquake and tsunami. > Manchester United IPO on hold, according to a source. > Zara owner Inditex profits from new markets. RATINGS NEWS:
Fitch affirmed Germany at AAA, stable; noted stable outlook for Dutch insurance sector; affirmed Barclays mortgage covereds at AAA; affirmed CE Electric UK Funding at BBB, now positive from stable, affirmed the group's two distribution operating businesses (Northern Electric and Yorkshire Electricity) at A-, stable; affirmed Eurohypo mortgage pfands at AAA, off RWN; revises Pernod Ricard outlook to positive, affirms BB+. Moody's noted European paper firms constrained by tougher trading conditions; affirmed Coface at A2, stable; downgrades KBC Bank to A1 from Aa3, outlook stable; cuts Banco Santander Totta covered bonds to A1; put Fortis Bank and BGL BNP Paribas' A1 long-term ratings on review for upgrade. S&P put Norske Skog B- on CWN; revised outlook on DAS A to stable from negative; affirmed EADS at A-, now positive from stable; revises R&R Ice Cream B+ outlook to negative. KEY EVENTS: FOMC begins second day of meeting on interest rate policy. Icelandic CB rates decision Czech Republic sells CZK8bn 3yr 2.75% March 2014s 0830 BoE minutes from Sep meeting 1030 Portugal sells EUR750-1.25bn total 3m/6m TBills 1130 BoE's Dale Speaks in South Tyneside, UK 1200 Norwegian CB rates decision, exp unch at 2.25% 1230 IMF Managing Director Christine Lagarde gives opening remarks before an IMF seminar, "Commodity Price Volatility and Inclusive Growth in LICs 1400 World Bank'S Zoellick Event, Washington 1500 U.S. Treasury'S Glaser Testifies, Washington 1800 U.S. Treasury'S Lago Testifies, Washington 1815 FOMC releases statement on interest rate policy. 2200 EC'S Van Rompuy Speaks at NYU Law School. ECONOMIC CALENDAR: See TGM2417 on Reuters, Bloomberg page TG2417, or here on IFR Markets.com (Reporting by Jon Penner and Adam Parry, IFR Markets)
