Telecom Italia grabbed the main attention in Europe's corporate bond markets on Monday after sources said the operator was planning an ultra-long issue, but the secondary market reaction to the deal was muted. The company plans to issue a euro-denominated bond with a 50-year maturity, sources said, taking advantage of rising demand for longer-dated debt from European pension funds and life insurers as well as hedge funds.
Telecom Italia was also the first corporate to sell 30-year bonds in euros.
Early indications suggested the new bond, which Deutsche Bank confirmed it would lead-manage, would be sold to yield 95 to 100 basis points over mid-swaps, or 20 to 25 basis points over Telecom Italia's existing bond due 2033, sources said.
The 2033 bond widened a couple of basis points to 87 basis points over Bunds in light volumes, traders said.
The paper was sold in January 2003 at 300 basis points over mid-swaps. Since then, the corporate bond market has seen spreads narrow to record-low levels.
The news had no impact on the rest of the telecoms bond market, said a trader. Analysts have for some time been expecting news of issuance from telecoms operators, even if Telecom Italia's choice of maturity is exceptional.
Elsewhere, auto bonds traded slightly weaker in mostly street-driven activity, said one trader in London.
General Motors' 8.375 percent euro bond due July 2033 was two basis points wider at 453 basis points over German Bunds at around 1530 GMT, he said.
The benchmark issue continued the slide it started on Friday, when it was hit - together with rival Ford's bonds - by news that car parts maker Delphi's chief financial officer had resigned over an investigation into past financial statements.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 38.8 basis points more than similarly dated government bonds at 1559 GMT, 0.5 basis points more on the day.
Britain's BAE Systems announced a $3.97 billion take-over of US armoured car maker United Defence Industries, but the reaction in the credit market was limited despite the large slug of debt in the deal, traders said.
The cost of insuring against a default by BAE edged higher in early trade but had stabilised at 34 basis points by 1415 GMT, four basis points more on the day. "People had expected them to make a US acquisition," said one credit derivatives trader. "The ratings agencies could do something, but I don't think the market expects more than a notch down, if that."
BAE is rated Baa2 by Moody's Investors Service and BBB by Standard & Poor's. Fitch Ratings rates it one notch higher, BBB+, but said on Monday it kept the company on rating watch negative and expected to downgrade it one notch if the deal proceeded according to the terms announced earlier.
In the primary market, more new issues are due to follow at the long end of the maturity curve. Italy's Finmeccanica on Monday hired Banca IMI, Morgan Stanley and SG CIB to manage the sale of a long-dated euro bond.
Comments
Comments are closed.