EURO CREDIT: Marginally tighter, more supply expected

Wed Mar 19, 2014 4:12am EDT

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LONDON, March 19 (IFR) - European credit markets are opening marginally tighter after a mixed night for Asian stocks that saw a modest gain for the Nikkei but an equally modest fall for the Shanghai Composite.

As of 0800 GMT, the iTraxx Main is a fraction tighter at 71.25bp, the Crossover 2bp tighter at 256bp, and the Senior Financials 0.5bp tighter at 87.75bp, according to Tradeweb as of 0745 GMT.

This week is shaping up to be calmer than feared and while the recovery in European stocks showed signs of faltering on Tuesday, it all turned out fine in the end. That has come largely thanks to hopes that Russian expansion plans will stop at the Crimea's border with Ukraine, tentatively raising hopes for a lowering of the geopolitical temperature.

In Europe, we can expect those with cash to continue their quest to find a productive home in which to invest capital with Spanish and Italian 10-year yields hitting fresh multi year lows. Greek and Portuguese bonds also rallied with the former assisted by news that the next aid tranche had been approved while the latter traded well into and after the buyback operation.

The message here is that the path of resistance for peripheral yields, and those in adjacent markets such as credit, still remains to the downside. In the case of Italy, 10-yr yields fell to a fresh multi-year low of 3.357% Tuesday which leaves sights set on the euro-lifetime low at 3.19% from Sep 2005. Spain yields got down to 3.297% yesterday although have a little further to go before reaching their euro-era lows at 2.97%, also from Sep 2005.

The main event today is the conclusion of the March FOMC meeting. Another $10 bln fall in monthly asset purchases (to $55 bln) is broadly expected, as is some change to the Committee's Zero Interest Rate Policy guidance.

It's not entirely clear what form that change will take, however. Options include removal of the unemployment threshold, a lowering of the threshold to something more in line with where the Committee now expects the unemployment rate to be when they expect to start hiking rates, or exchanging quantitative guidance for qualitative, describing more generally the types of conditions and data they'll be looking at as guideposts.

Along with the statement, we'll get updated economic projections, and shortly thereafter will be Chair Yellen's first press conference. As with any new Chair, she will be watched for differences of style as well as substance. She will, however, likely do her best to try to leave the latter to the statement. Data is strictly second tier.

Before we get to that however George Osborne will show off his red box outside Downing Street ahead of the budget.

Osborne is unlikely to come up with anything earth shattering here, with the highlight likely to be an increase in the threshold at which income tax starts to be paid as he seeks to broaden the parties appeal ahead of the next election. The Budget will also contain the Government's financing plans for the coming year and the DMO auction timetable. ECONOMIC CALENDAR: See TGM2417 on Reuters, Bloomberg page TG2417, or here on IFR Markets.com PRIMARY MARKET: PRICED DEALS: Issuer Amount Coupon Maturity Spread Sweden USD2BN 0.750 12-Apr-17 MS-3 EU EUR2.6BN 1.875 04-Apr-24 MS+9 LRP EUR500M 1.750 25-Mar-24 MS+6 EIB tap EUR350M 0.500 15-Sep-17 MS-17 NBC EUR1BN 1.500 25-Mar-21 MS+22 NAB EUR500M 3mE+50 25-Mar-19 3mE+52 Piraeus Bank EUR500M 5.000 27-Mar-17 5.13% RCI Banque EUR500M 2.250 29-Mar-21 MS+98 Fiat EUR1BN 4.750 22-Mar-14 MS+339.8 ArcelorMittal EUR750M 5.000 25-Mar-19 MS+210 Total EUR850M 2.500 25-Mar-26 MS+55 SEB tap SEK500M 3mS+44 02-Oct-18 3mS+27 LSH tap EUR350M 3mE+15 12-Feb-21 3mE+14 BNG tap AUD50M 5.250 20-May-24 ACGB+92.25 EIB tap TRY95M 9.250 20-Jul-18 TGB+40 Realkredit Dan SEK4.6BN 3mS+27 01-Oct-16 Realkredit Dan SEK1.6BN 3mS+33 01-Oct-17 KfW tap TRY50M 7.750 03-Feb-16 IBRD tap BRL35M 9.500 02-Mar-17 Rentenbank NOK850M 3mN ft 03-Apr-17 3mN-11 KBN NZD175M 5.000 28-Mar-19 MS+42

MANDATES / NEWS:

SSA:

The Republic of Slovenia (Ba1 stable/A- stable/BBB+ neg) has mandated Barclays, Commerzbank, HSBC, SG CIB and UniCredit to arrange a series of investor meetings in Europe starting the week of 24th March. A Euro-denominated benchmark Regulation S transaction in dematerialised registered form may follow subject to market conditions.

KBN, rated AAA/Aaa, is taking indications of interest on a new USD1bn March 2016 at mid-swaps plus 4bp area via Goldman Sachs, JP Morgan and RBC. Today's business.

FIG/COVERED:

Aktia has hired Commerzbank, JP Morgan, LBBW and Nordea to arrange an investor roadshow ahead of a potential euro covered bond starting from March 25.

AIB Mortgage Bank has mandated Barclays, Commerzbank, Danske Bank, HSBC and SG CIB for its upcoming 7-year Euro benchmark Irish Mortgage Covered Bond (ACS) transaction.

CORPORATE/EM/HY:

Full details of all the day's pricings on Reuters page TGM17522, Bloomberg TG17522, or here on IFR Markets.com.

For the pipeline of upcoming deals see Reuters TGM17546, Bloomberg TG17546, or here on IFR Markets.com.

RATINGS:

Moody's said Euro area sovereign credit trends stabilising; no return to pre-crisis rating levels in sight for periphery

Moody's said Rosneft's agreement with SIBUR on Yugragazpererabotka is credit positive

Moody's changed outlook on Adecco's Baa3 rating to positive from stable; ratings affirmed

Moody's downgrades Evrofinance Mosnarbank's deposit ratings to B1; outlook stable

Moody's assigned Baa1 ratings to Yorkshire Building Society's GBP5bn EMTN programme

Moody's changed outlook on Vodafone's A3 ratings to negative following ONO acquisition Moody's placed ratings of ONO (CFR at B2) under review for upgrade

Moody's reviewed for downgrade the ratings of 10 Turkish banks

Moody's assigned a first time Ba3 CFR to Almirall; outlook stable Moody's downgrades Morrisons to Baa2; outlook negative.

Fitch affirmed Vinci at 'BBB+'; Outlook Stable Fitch placed KDG on Rating Watch Negative Fitch placed Cableuopa on Rating Watch Positive on Vodafone Offer

Fitch said Morrisons price cuts pressure Tesco; margins at risk S&P revised Danish Telecom TDC outlook to stable; affirmed 'BBB' (Reporting by Helene Durand, Editing by Julian Baker)

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