New cash bonds flooded the corporate credit market on Monday, while credit derivatives indexes were little changed. Investors snapped up bonds from companies including Telecom Italia, Barclays, Lafarge, Caterpillar, BASF, E.ON and Renault's RCI Banque. New covered bonds also came to market from Eurohypo, Dexia Municipal Agency and ING.
"Amid the ebb and flow of economic data and the gathering and disappearing of economic discontent, if there is just one thing that is clear, it is that investment-grade credit is well-bid and supported," Suki Mann, head of credit strategy at SG CIB, said in a note to investors. The 156 billion euros ($210 billion) of issuance so far this year is just 10 billion euros short of the second-highest annual total ever in euro-denominated bonds, he estimated.
Bond spreads have continued to tighten, although "we think the rate of the tightening is set to slow" even while the asset class will continue to be attractive, Mann said. By 1537 GMT, the investment-grade Markit iTraxx Europe index was at 135.5 basis points, according to data from Markit, 1.5 basis point wider versus late on Friday.
The Markit iTraxx Crossover index, made up of 45 mostly "junk"-rated credits, was at 788.75 basis points, 1.25 basis points tighter. Among single names, five-year credit default swaps on Porsche widened by more than 65 basis points to 415 basis points, according to Markit data.
Volkswagen froze talks over a merger that could bail out Porsche, its majority owner, which then scrambled to reassure investors that a deal to unite the two companies was still on. Five-year CDS on Volkswagen were 9 basis points tighter at 198 basis points.
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