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MNI Credit Weekly: Shifting Sands

MNI Credit Weekly: Shifting Sands

MNI Credit Weekly: Shifting Sands

Executive Summary: Low volatility persists but idiosyncratic risks are brewing.


  • IG cash spreads 2bp tighter after a short week, with financials outperforming as supportive earnings releases continue. The disruption to primary supply from European holidays provided technical support.
  • Primary launch spreads averaged their lowest week this year, in a truncated week skewed to A rated supply. Expect primary to pick up again next week with the majority of issuers through earnings releases.
  • Earnings season continues to paint a mainly positive picture for the rest of the year.
  • With animal spirits returning, we see M&A as the main source of idiosyncratic risk from here. The interest rate cycle has added a rather unique twist; some low cash price investment grade bonds are exposed to technical defaults under asset sale covenants. We have seen Solvay forced to take out bonds last year; similar situations have been brewing at TenneT, Essity and Vivendi; Tesco has also come under the spotlight but looks set to avoid the threshold. We expect more such situations to arise as M&A picks up
  • 24.05.10 MNI Credit Weekly.pdf


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