Marketing Communication
Euro Corporate Weekly Meltdown of total returns
Group Economics Macro & Financial Markets Research Hyung-Ja de Zeeuw +31 20 628 3551 Hyung-ja.de.zeeuw@nl.abnamro.com
DISCLAIMER: This report has not been prepared in accordance with the legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead. This report is marketing communication and not investment research and is intended for professional and eligible clients only.
08 May 2015
Correction in Bunds crushed total returns in credit Total return for Non-Financials senior went back to square one Total returns of AA and A rated credit paper dive into negative territory Credit spreads remained very resilient amid market turmoil With a beat:miss ratio of 5:3, results remain better than expected
Correction in Bunds crushed total returns in credit
Table 1 - iBoxx EUR IG Total return
The correction in the Bund that started in the second half of April has had a devastating impact on total returns. On 17
Total Return
YTD
chg. week
chg. month
April, total return for Non-Financials senior category reached
Corporates
0.14%
-0.73%
-1.33%
its highest year to date level, of 1.93%. Yesterday end of day,
Non-Financials
0.05%
-0.85%
-1.54%
total return had slumped to -0.03%. All return lost in just three
Non-Financials Sr.
-0.03%
-0.82%
-1.53%
weeks.
Non-Fins Sub
1.72%
-1.22%
-1.62%
Non-Fins AA
-0.17%
-1.03%
-1.90%
Non-Fins A
-0.18%
-0.87%
-1.60%
Non-Fins BBB
0.27%
-0.79%
-1.41%
Total return fell off a cliff In %
2.5
Source: ABN AMRO Group Economics, Markit
2.0 1.5
Credit spreads remained resilient in volatile markets
1.0
The recent volatility in the Bund reached levels we haven’t seen before. The intraday move of 19bps from peak to trough
0.5
in the 10 year Bund on Thursday was unprecedented. Equity
0.0
indices also lost ground during the day, only to recover in the afternoon.
-0.5 Jan
Feb
Mar
Apr
May
Non-Fins sr
Against this backdrop, cash credit spreads remain remarkably resilient. Spreads are more or less unchanged on the week. A
Source: ABN AMRO Group Economics, Markit
very strong performance in such a volatile market environment. Last week, we had a very similar picture with choppy equity
But things are even worse for higher rated paper. The Bund
and Bund markets and spreads grinding tighter.
selloff caused total returns of AA and A rated paper to dive into double digit negative territory this week. Only the BBB rated
The main reason for the resilient performance is that both
category and subordinate paper managed to stay total return
investors and issuers remain side lined. We haven’t seen any
positive. Only here the carry was high enough to form a buffer
meaningful flows in Non-Financials. There weren’t any bottom
to absorb the fierce movement in Bunds.
fishers nor panic sellers in the market.
Insights.abnamro.nl/en
Bloomberg: ABNM
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Euro Corporate Weekly –
Leverage will rise in the coming years - 08 May 2015
Potential issuers also remained silent this week. The window
the Health Care sector company specific drivers led to better
of opportunity to place deals in the market was hampered by
than expected earnings.
the extreme volatility. Also bank holidays and blackout periods reduced supply. We’ve only seen EUR 1.8bn of new
60% presented better than expected earnings
benchmark deals in the IG market this week.
In EUR bn
Rising Bund yields, resilient spreads Spread in bps
90 85 80 75 70 65 60 55 50 01-Jan
Bund yield in %
0.20 0.15 0.10 0.05 0.00 -0.05 -0.10 -0.15 -0.20 01-Feb
01-Mar
Non-Financials spread
01-Apr
01-May
> Technology > Utilities > Telecommunications > Consumer Services > Health Care > Consumer Goods > Industrials > Basic Materials > Oil & Gas All Securities 0%
Positive
20%
In-line
40%
60%
80% 100%
Negative
Source: ABN AMRO Group Economics, Bloomberg
5y gen Bund yield
Table 2 - iBoxx EUR IG Sector Performance Asset swap margin in bps
Source: ABN AMRO Group Economics, Bloomberg
07/05/2015
chg. week
chg. month
chg. YTD
Corporates
85
0
0
-3
The pace of supply slowed down recently
Non-Financials
79
1
2
0
In EUR bn
Non-Financials Sr.
69
0
1
-1
Non-Fins Sub
243
5
-3
-32
Non-Fins AA
44
0
2
1
8
Non-Fins A
58
-5
-5
1
60
6
Non-Fins BBB
106
4
3
-7
Non-Fins 3-5 year
56
-4
7
-2
40
4
Non-Fins 5-7 year
72
2
3
3
20
2
Non-Fins 10+
97
4
7
-3
Automotive
79
-4
-8
14
Basic Resources
96
-8
-4
1
Chemicals
62
1
1
-3
Construction
71
-3
10
-1
Oil & Gas
82
3
4
-30
Food & Beverages
60
-2
1
8
Health Care
69
6
9
13
Results remain better than expected
Industrial Gds & Serv
64
0
5
4
The end of the reporting season is getting in sight. 121 iBoxx
Media
92
16
19
21
Non-Financial members reported results so far. The beat:miss
Personal & HH Goods
63
1
0
10
Retail
73
0
1
-27
Technology
43
0
1
4
Telecom
93
-2
-4
-1
100
10
80
0
0 Jan
Feb
Issuance (rha)
Mar
Apr
May
Issuance cummulative (lha)
Source: ABN AMRO Group Economics, Bloomberg
ratio stands at 5:3, which is a small deterioration compared to last week when the ratio stood at 2:1.
Travel & Leisure
85
-2
5
4
Most disappointments can be found in the Basic Materials
Utilities
92
2
5
6
sector where the beat:miss ratio stands at 1:6. In this sector,
Source: ABN AMRO Group Economics, Markit
oil & gas related chemicals and metals & mining companies are facing tough market conditions. On the other end of the spectrum are Health Care and, perhaps surprisingly, Oil & Gas. The latter saw its earnings boosted by its refinery business, despite the lower oil prices. In
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Euro Corporate Weekly –
Leverage will rise in the coming years - 08 May 2015
Table 3 – Benchmark Non-financial new issues this week Date
Issuer
05/05/15 06/05/15 06/05/15
REED ELSEVIER PROLOGIS FORD
Size (m ln) Coupon 600 700 500
1.30 1.375 1.114
Maturity
tenor
IPT
Spd at launch vs MS
12/05/25 13/05/21 13/05/20
10.0 6.0 5.0
85a 160a 80a
72 102 73
Final NIP* 12
08-May YAS_ISPREA 69 97 71
Perform ance Moody S&P -3 -5 -2
Baa1 Baa1 Baa3
Fitch
BBB+ BBB+ BBB+ BBB BBB-
Book Counvs try Deal (x) iBoxx class UK US US
Media Real Estate Automotive
Source ABN AMRO Group Economics, Bloomberg/Bondradar,
Table 4 – Performance recent new benchmark deals Date
Issuer
Size (m ln) Coupon
01/04/15 07/04/15 08/04/15 08/04/15 08/04/15 09/04/15 09/04/15 10/04/15 13/04/15 13/04/15 13/04/15 14/04/15 14/04/15 16/04/15 16/04/15 16/04/15 20/04/15 21/04/15 22/04/15 22/04/15 23/04/15 23/04/15 29/04/15 29/04/15 29/04/15 29/04/15
CENTRICA VOLKSWAGEN KLEPIERRE UNIBAIL UNIBAIL BMW BMW RED ELECTRICA FCA CAPITAL ANHEUSER-BUSCH ANHEUSER-BUSCH RWE RWE BERTELSMANN BERTELSMANN EDP GENERAL MILLS GAS NATURAL BHP BILLITON BHP BILLITON JAB HOLDINGS SMITHS GROUP BRISTOL MYERS BRISTOL MYERS DONG PEARSON
750 750 750 500 500 500 1000 500 700 1250 1000 550 700 600 650 750 500 500 650 750 600 600 575 575 600 500
3.00 0.75 1.00 1.375 1.00 1.00 0.625 1.125 1.375 1.50 0.80 3.50 2.75 3.50 3.00 2.00 1.00 3.375 0.75 1.50 1.625 1.25 1.00 1.75 3.00 1.375
Maturity 10/04/76 14/10/21 17/04/23 15/04/30 14/04/25 20/04/27 20/04/22 24/04/25 17/04/20 18/04/30 20/04/23 21/04/75 21/04/75 23/04/75 23/04/75 21/04/25 27/04/23 Perpetual 28/10/22 29/04/30 30/04/25 28/04/23 15/05/25 15/05/35 Perpetual 6/05/25
tenor
IPT
61.0 6.4 7.9 75a 14.9 85a 9.9 65a 12.0 55/60 7.0 40/45 10.0 75/80 4.9 135a 15.0 90/95 8.0 55a 60.0 3.5-3.625% 60.0 2.875-3% 60.0 3.625-3.75% 60.0 3.125-3.25% 10.0 165a 8.0 75/80 PNC9 3.625% 7.5 55a 15.0 90a 10.0 125/130 8.0 100a 10.0 65a 20.0 100a 1000.5NC5.5 3.25%a 10.0 90/95a
Source ABN AMRO Group Economics, Bloomberg/Bondradar,
Spd at launch vs MS 269 40 65 75 50 50 35 65 122 85 45 300 264 296 264 155 68 308 50 85 125 95 53 90 282 82
08-May YAS_ISPREA 292 31 56 77 59 52 34 72 105 77 40 278 277 264 243 126 56 297 47 75 118 91 42 87 272 79
Perform ance Moody S&P 23 -9 -9 2 9 2 -1 7 -17 -8 -5 -22 13 -32 -21 -29 -12 -11 -3 -10 -7 -4 -11 -3 -10 -3
Baa3 A2
A2 A2 Baa3 A2 A2 Baa3 Baa3 Baa3 Baa3 Baa3 A3 Ba1 A1 A1 Baa1 Baa2 A2 A2 Baa3 Baa1
BBB A AA A A+ A+ BBB+ BB+ A A BBBBBBBBBBBBBB+ BBB+ BB+ A+ A+ BBB+ BBB+ A+ A+ BB+ BBB+
Fitch
A+ A+
ABBB-
BBBBBB+ BBB-
BBB-
Country iBoxx class UK DE FR FR FR DE DE SP IE BE BE DE DE DE DE PT US SP UK UK LU UK UK UK DK UK
Utility Automotive Real Estate Real Estate Real Estate Automotive Automotive Utility Automotive Food & Beverage Food & Beverage Utility Utility Media Media Utility Food & Beverage Utility Basic Materials Basic Materials Consumer Food & Beverage Health Care Health Care Utility Media
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Euro Corporate Weekly –
Leverage will rise in the coming years - 08 May 2015
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