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CREDIT UPDATE
  • Hard not to headline the weekly on Elo/Auchan's moves post downgrade into HY; its curve already priced wide (private equity issuer, single rated) but we didn't think markets saw a downgrade coming (based on some strong sessions tighter post-earnings); it initially cheapened aggressively before nearly paring all of it back on reported dip buying. The 28/29's (at Z+250/280) do screen wide but not a name we have a firm view on yet.
  • That was peak vol for us on rating changes; Bayer had S&P & Fitch come - both lagging To move in-line with Moody's - the latter the drawcard for ratings (on Baa2 Neg) and still to come this year - which is starting to worry us on our (& from our chats markets) base case view for it to stay put on Baa2 Neg (vs. a 1-notch downgrade). Bayer may not be alone - Reckitt's baby formula lawsuit loss hammering its equities and even high-grade bonds this afternoon. In airlines, we saw cross-over rated IAG get put on review for upgrade (markets pricing it already firmly in IG) while Lufthansa traded past strike news to continue outperforming.
  • On our existing views, some evidence of Coty (screens rich) & VFC (screens cheap) correcting wider/tighter, while still no strong signs of BKNG outperformance. BAT surprised us with another leg lower in leverage targets giving it (some) excuse to hold onto its tight levels.
  • Issuance was broadly well taken with pricing continuing to be tight to secondary. Only notable exception for us was Nestle in a 2-part £ deal. We did see secondary weakness on supply - but it generally reversed in the sessions following - EasyJet (28s) a prime example.
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  • Hard not to headline the weekly on Elo/Auchan's moves post downgrade into HY; its curve already priced wide (private equity issuer, single rated) but we didn't think markets saw a downgrade coming (based on some strong sessions tighter post-earnings); it initially cheapened aggressively before nearly paring all of it back on reported dip buying. The 28/29's (at Z+250/280) do screen wide but not a name we have a firm view on yet.
  • That was peak vol for us on rating changes; Bayer had S&P & Fitch come - both lagging To move in-line with Moody's - the latter the drawcard for ratings (on Baa2 Neg) and still to come this year - which is starting to worry us on our (& from our chats markets) base case view for it to stay put on Baa2 Neg (vs. a 1-notch downgrade). Bayer may not be alone - Reckitt's baby formula lawsuit loss hammering its equities and even high-grade bonds this afternoon. In airlines, we saw cross-over rated IAG get put on review for upgrade (markets pricing it already firmly in IG) while Lufthansa traded past strike news to continue outperforming.
  • On our existing views, some evidence of Coty (screens rich) & VFC (screens cheap) correcting wider/tighter, while still no strong signs of BKNG outperformance. BAT surprised us with another leg lower in leverage targets giving it (some) excuse to hold onto its tight levels.
  • Issuance was broadly well taken with pricing continuing to be tight to secondary. Only notable exception for us was Nestle in a 2-part £ deal. We did see secondary weakness on supply - but it generally reversed in the sessions following - EasyJet (28s) a prime example.