European corporate bond investors soaked up 2.4 billion euros of supply on Wednesday from Dutch telecom KPN, French retailers Auchan and PPR and German sugar producer Suedzucker, with secondary prices remaining firm. The rush of supply shows no signs of slowing, with SFR, France's second largest mobile operator and part of the Vivendi Universal group, working on a benchmark euro bond for launch after presentations starting on June 30.
And the high-yield market proved it is open for business as South Africa's Foodcorp sold a 175 million euro bond, the first in Europe since May 4.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 41.0 basis points more than similarly-dated government bonds at 1503 GMT, 0.6 basis points less on the day.
"New issues give the market confidence," said a bond trader in London. "Now it's just a question of when the supply proves too much. But that hasn't happened yet."
After tightening through the morning, spreads were giving back some ground in the European afternoon session, in line with action in the US markets, traders said.
"An hour ago, I'd have said the market was on fire. Now we're softening up a bit. But there's nothing really to it, just that the pendulum had swung too far one way," said a high-yield bond trader.
The Netherlands' KPN led activity with a 1.0 billion euro 10-year bond that was priced to give a spread of 72 basis points over swaps, well inside initial guidance of around 75 basis points over.
Traders had said the initial guidance looked generous versus the company's credit default swaps and outstanding debt, and the bond tightened by around a basis point shortly after launch.
But it was a different story for France's unlisted Auchan, which priced a 600 million euro five-year bond at swaps plus 30 basis points, at the wide end of initial guidance of 27-30 basis points.
"This is the first bond in the recent spate that has not traded tighter," said a trader, who said it was indicated one basis point wider by 1500 GMT at 45 basis points over Bunds.
Meanwhile, Germany's Suedzucker offered a relatively unusual 500 million euro subordinated bond at 210 basis points over mid-swaps.
Subordinated bonds blend some of the characteristics of debt and equity. They strengthen a borrower's balance sheet and pay a higher return to investors than standard senior debt. Swedish utility Vattenfall and Danish Oil & Natural Gas (DONG) are working on similar deals.
Late in the session, PPR sold a 300 million euro January 2013 bond at a spread of 92 basis points over swaps, at the low end of earlier guidance.
South Africa's Foodcorp reopened the European high-yield market on Wednesday with a 175 million euro 7-year bond that priced with a coupon of 8.875 percent, below guidance of 9 percent area, via Citigroup. The deal is the first since May 4, with the market shutting down in the intervening period in the wake of the downgrades to "junk" of General Motors and Ford Motor Co.
Comments
Comments are closed.