Euro CDS: New Issue Indigestion; Financial Sub Debt Suffers
LONDON (MNI) - European credit markets have had a mixed session despite some solid advances in the stockmarket. European equities have traded almost 1% higher with blue chips leading the way, on the tails of the better than expected US ADP employment report yesterday. Markets actually got off to a rather muted start but the continued advance of the dollar on the back of the data has spilled over into the equity market.
On Wednesday the dollar saw broad based gains as analysts revised up their non farm payroll forecasts following the ADP data. Credit markets, however, have seen a less robust performance, with evidence that the raft of new issues seen so far this week has already caused a degree of indigestion in the market, with a couple of deals needing to be priced at the higher end of guidance. The other area to see some pressure is financial sub debt.
Today the Daily Telegraph reported that the European Commission will press ahead with plans to spread the burden of EU bank failures to senior bondholders, marking the start of harsher times for Europe's creditors. Michel Barnier, the single market commissioner, will publish a "consultation paper" outlining ways to shield taxpayers from banking crises. It is the first stage of what will almost certainly become a binding law, according to the article, which in effect has confirmed the markets' worst fears on the subject (which resulted in massive underperformance of sub debt through the past couple of months).
Xover today is 3 basis points tighter at 414 basis points, HiVol flat at 147bps and Europe flat at 102bps. Financial seniors are 5bps wider at 185bps and financial sub debt indices are 10bps wider at 351bps.
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