Bonds: new issues take spotlight

20 Mar, 2004

New and forthcoming issuance stole the show in Europe on Friday as Network Rail continued its funding spree with two large euro deals and France's Pinault Printemps Redoute drew demand for a seven-year euro bond.
The high-yield market continued to roar along, with British cable operator NTL formally outlining its plans to return to the market in the near future, and Aker Kvaerner pricing a euro deal.
Activity stepped up a gear in secondary trading as new issues came to life. "We have seen selling out of industrials into telecoms and autos," said a trader in London.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 62.1 basis points more than similarly dated government bonds at 1629 GMT, 0.1 basis points less on the day.
"We have had leveraged and real money buying, though the real money has not been in huge amounts. But its the busiest we have been in three weeks, with a fair bit on the offer side," the trader said.
High-beta names - lower-rated credits that are more sensitive to moves in the underlying market - were leading the way, some four basis points tighter on the day, another trader said.
French retailer Pinault Printemps Redoute raised 600 million euros with its seven-year bond, which carries a coupon of 5.25 percent. The company drew orders of over one billion euros, Societe Generale, one of the lead managers with BNP Paribas and HSBC, said in a statement.
Investors in France and the UK were key destinations for the bond, accounting for 25 percent each, while Germany took 20 percent.
Standard & Poor's is the only ratings agency to rate PPR, and assigns a rating of BBB-, at the bottom of investment grade.
Around 1530 GMT, the new bond was largely unchanged in value, trading bid at 182 basis points over Bunds, a trader said.
Elsewhere, Britain's Network Rail wrapped up a big week of fund raising with a 3.75 billion euro two-part sale of fixed- and floating-rate debt.
The sale brought the total raised for the week to 6.45 billion pounds equivalent, as investors rushed to buy bonds from the state-backed firm.
The railway operator, which owns 34,000 kilometres of track and 2,500 stations, is the successor to Railtrack, which was put into administration by the UK government in 2001.

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