Senior & Subordinated Financials Spreads

iBoxx EUR Financials Index data provided by Markit Group Ltd

i) Senior Financials Spreads

Senior financial debt spreads came under the same pressure in 2018 as the wider market, the iBoxx cash index widening by 74bp to B+157bp. Supply had been taken down well and we had the lowest year for senior deals since the beginning of the euro currency era – all to no avail as the lower primary dynamic failed to support the market.

And in 2019, the trend has also followed the wider market with the index tightening by 46bp to B+110bp. We’ve also had the highest run rate in issuance for 4-years without a detrimental impact on spreads (to end September).

See below for further charts.

More for Subscribers:

Time to count one’s chickens

Christmas might have come early... It wasn't the easiest session to figure out and trade through - until the US opened anyway. The violent scenes in Hong Kong previously, developments in the UK election, needing to think about the German Q3 GDP print due later this week and some apprehension (again) around the US/China/Europe trade tariff situation all saw to that. It wou [...]

Continue reading

Buy the dip opportunity

Keep believing, for now... The sell-off in the underlying has presented credit market investors with a near-term buying opportunity. It will keep spreads supported into year-end, although we are likely going to see an impact on total returns in low beta sectors of the credit market. No sweat. Given where the numbers are in credit so far this year, there is enough of a buffer [...]

Continue reading

Twin peaks

Record supply meets the demand... There are still six weeks of business left in the market this year, but already IG non-financial corporate bond issuance has set a fresh record. Deals from Apple and Bayer took us zipping past the €285bn record from 2009. And a trio of transactions in a busy high yield primary market made for 2019 being the second-best year for deals in th [...]

Continue reading

Risk markets rediscovering appetite

As trade deal hopes rise... The rallying markets are not getting ahead of themselves - as seen in a more reflective session on Tuesday. Nevertheless, the potential for some kind of a trade deal is the main driver for an improvement in the general tone, and the odds are stacked in favour of something getting done - not least because Trump needs a deal. It might be the only [...]

Continue reading

ii) Senior Financials Spreads 2015-

Print  Copy  

iii) Subordinated Spreads

The subordinated debt markets also saw considerable weakness with the index almost doubling, in spread terms in 2018. Much of that weakness came from the CoCo sector where prices fell sharply on the back of weakness seen in other markets but also afflicted by single name event risk (Deutsche Bank, for example).

However, the search for yield in 2019 amid a crunch lower in government bond yields has helped this market tighten with returns, for example, in the 12%+ area in the first 9-months of the year in the AT1, with spreads 107bp tighter in the subordinated index.

Also in Premium:

Think European Bank Capital is boring? Think again (Free Content)

It's just the opposite...if you look carefully I can empathise with those who think that investing European bank capital is not that interesting given the plethora of negative news and it is the usual story of missed opportunities, sovereign bank nexus and difficulty in estimating recurrent earnings etc.  Plus, the ongoing issues around business model, KYC issues and reliance [...]

Continue reading

Bank Capital: Investing in the “EGG ME” Era | Free Content

You may not like it but EGG ME is here to stay First it was the PBOC, then came the ECB and now the Fed.  Investors are now starting to pencil in the likely new era of “EGG ME” or Extraordinary Globally Guaranteed Monetary Easing in perpetuity.  And in this “EGG ME” background it is becoming difficult to get bullish on bank equity in any part of the developed world. [...]

Continue reading

Will the German Mega Zombie Bank (GMZB) take off? | Bank Capital Insights

So, it is official - Two zombies may join up to form a mega bank Earlier this Sunday, both DB and Commerzbank officially confirmed that they are in exploratory talks about a potential merger.  It looks like the German government is happy to see the two banks combine and create a German national champion bank.  It will take a while before the exact merger details are known as [...]

Continue reading

iv) Subordinated Spreads 2015-


 

v) 2008-2009: Sub financials collapse and recovery

Weds Chart