EU Close

$IG equities are +0.5% & as expected lagging S&Ps +1.8% move driven by Tech. €IG basket is +0.5%, facilities manager ISS {ISS DC Equity -8.9%} (Baa3 S, BBB- Pos) the biggest fall. FY23 earnings came in-line & FY24 FCF guidance was >2.4b ex. potential -600m one-off DTE impacts (c2.5b) - latter seems to be focus for equities, its cash lines still moved 2-7bps tighter reversing underperformance from last year but still trading wide to BBB names.

Leverage now in line with Moody's expectations/mid-point of company target & we don't have much visibility on S&P's move to Pos. in Oct last yr -but hard to see today's earnings influencing it negatively - mgmt reiterating focus on BS with buybacks still at conservative levels/below ceiling despite leverage in range. No firm view from us on ISS's curve here.

Muted moves in equities hasn't stopped spreads from posting a strong rally today - €IG is pointing to a >1bp move & similar start from $IG with some pullback (still tighter) into midday. Leading move tighter today were PBB lines (reversing earlier widening), tobacco curves (continuing to compress discount to index) & Accor {AC FP Equity +6%} (post-earnings move that we see leaving the curve tight to FV).

iTraxx keeping pace with cash today finishing -1.8/-8.3 tighter. Main has been lagging €IG cash rally YTD (we partly think from it staying rangebound against CDX/$IG cash) & has given local basis a tailwind to reverse higher in Jan - that dynamic seems to be continuing this month.

$ETF flows continue to look weak - weekly fund flows reported tomorrow might still show mutual funds picking up the slack with little impact in primary & secondary. Locally today's deal from Boston specific should nudge € area issuance slightly above expectations - but still a slow pace with MTD gross issuance below recent years - that's in contrast to $IG that's testing another record month.