EUROBONDS: Primary Quiet Ahead of US Jobs Data, Market Mood Sours
First Published Friday, 6th July 2012 12:08 pm - © 2012 Dow Jones
By Serena Ruffoni
Just one company ventured into the European credit market Friday, as traditionally borrowers refrain ahead of important data releases, such as the U.S. non-farm payrolls numbers, due later in the day.
Moreover, the gloom in European secondary markets Friday was not especially conducive to new bond issuance.
Dutch gas transport company Gasunie is set to price a 10-year, EUR500 million bond sale.
The issue will price at 83 basis points over midswaps, tighter than the initial price guidance, previously released for in the area of 90 basis points over midswaps.
ABN Amro, BNP Paribas and Royal Bank of Scotland Group PLC are lead managers on the transaction, which is expected to price later Friday.
The issuer is rated A2 by Moody's Investors Service Inc. and AA- by Standard and Poor's Corp.
At the same time, the company launched a tender offer targeting up to EUR460 million of its EUR1.4 billion 6% notes due 30 October 2013. The offer expires July 13.
Market sentiment permitting, next week should see a pick up in issuance as there are only a few weeks left before the London Olympics, and the August slow period.
Meanwhile, the cost of insuring European corporate and sovereign debt against default continued to push higher Friday as investors showed disappointment over the European Central Bank's latest attempt to contain the region's debt crisis.
ECB President Mario Draghi indicated that the central bank would not undertake another injection of cheap, longer-term money along the lines of the more than 1-trillion-euro Long Term Refinancing Operations of December and February.
Disappointment ensued, and the Spanish 10-year bond yields rose to just below the 7% mark, while Italian 10-year bond yields surpassed 6% Friday. Sentiment soured not only on the sovereign CDS market but also on corporate CDS markets.
At around 1100 GMT, the iTraxx Europe index, which comprises 125 high-grade borrowers, 25 of which are banks and insurers, was at 167/168 basis points, three basis point wider from Thursday's close, according to data-provider Markit.
Credit default swaps are derivatives that act as an insurance contract for debt, with the seller of CDS compensating the buyer in the event of non-repayment of bonds.
The Crossover index of 40 mostly sub-investment-grade European corporate borrowers was eight basis points wider at 669/672 basis points.
Write to Serena Ruffoni at email@example.com