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MNI Credit Weekly: Animal Spirits Are Returning

A more subdued week in corporate credit; results season has been broadly solid and we are seeing animal spirits returning to markets with at least three major deals in the pipelines.

CreditCredit AnalysisAnalysis

Executive Summary: With a public holiday and a Fed meeting, volatility subsided again this week. Spreads are ending the week slightly wider, but the bulk of results season has been solid with few serious profit warnings, we feel. Animal spirits are finally making a comeback with Glencore looking at Anglo American after it rejected BHP last week, BBVA bidding for Sabadell and SES buying Intelsat.

  • IG cash spreads are marginally wider this week with consumer cyclicals, comms and basic industry issuers the most hit, tech and transportation both marginally tighter.
    • Financials were tighter, both banks and insurers with results season looking solid but mgmt teams still reticent about upgrading revenue guidance, even as forward curves have moved hawkishly since the start of the year.
    • Autos OEM results were relatively soft, but Valeo and BorgWarner had better results and outlooks.
    • Industrials generated few fireworks ahead of US reporters coming next week.
    • Consumer news was skewed positively with the FTC’s block of Tapestry/Capri finally moving spreads.
    • Property earnings were broadly in line with some tightening seen. This fed through to some of the key property-exposed banks, too.
    • Healthcare had positive updates from Philip and Pfizer (results) along with Bayer (regulatory). Novo Nordisk and Baxter disappointed.
  • Fed news was a little more dovish at least the bias remains for easing and the next move is seen as most likely a cut – some hawks had been looking for a hike this year. The ECB has stuck to its “June cut” position and the 70bps of cuts priced in for FY24 is little changed on the week.
  • Ratings moves: every IG rating action this week was positive, HY more mixed.
  • Supply for the week was a pretty middling EUR10.25bn, with the market closed on Wednesday and Friday, which went down well. Several deals priced with low single digit NICs. We did also see the widest launch spread on a €IG deal YTD; CPI Property 5yr that priced at MS+529bps (cover above 6x). T-Mobile also came with a very interesting 2bn inaugural EUR triple tranche deal.
Full piece here:

24.05.03 MNI Credit Weekly.pdf

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Executive Summary: With a public holiday and a Fed meeting, volatility subsided again this week. Spreads are ending the week slightly wider, but the bulk of results season has been solid with few serious profit warnings, we feel. Animal spirits are finally making a comeback with Glencore looking at Anglo American after it rejected BHP last week, BBVA bidding for Sabadell and SES buying Intelsat.

  • IG cash spreads are marginally wider this week with consumer cyclicals, comms and basic industry issuers the most hit, tech and transportation both marginally tighter.
    • Financials were tighter, both banks and insurers with results season looking solid but mgmt teams still reticent about upgrading revenue guidance, even as forward curves have moved hawkishly since the start of the year.
    • Autos OEM results were relatively soft, but Valeo and BorgWarner had better results and outlooks.
    • Industrials generated few fireworks ahead of US reporters coming next week.
    • Consumer news was skewed positively with the FTC’s block of Tapestry/Capri finally moving spreads.
    • Property earnings were broadly in line with some tightening seen. This fed through to some of the key property-exposed banks, too.
    • Healthcare had positive updates from Philip and Pfizer (results) along with Bayer (regulatory). Novo Nordisk and Baxter disappointed.
  • Fed news was a little more dovish at least the bias remains for easing and the next move is seen as most likely a cut – some hawks had been looking for a hike this year. The ECB has stuck to its “June cut” position and the 70bps of cuts priced in for FY24 is little changed on the week.
  • Ratings moves: every IG rating action this week was positive, HY more mixed.
  • Supply for the week was a pretty middling EUR10.25bn, with the market closed on Wednesday and Friday, which went down well. Several deals priced with low single digit NICs. We did also see the widest launch spread on a €IG deal YTD; CPI Property 5yr that priced at MS+529bps (cover above 6x). T-Mobile also came with a very interesting 2bn inaugural EUR triple tranche deal.
Full piece here:

24.05.03 MNI Credit Weekly.pdf