DAILY CLOSE: First three post-election euro trades go smoothly
** The decisive result in the US presidential election, which was seen as unlikely when we came into the week, meant that the primary issuance window opened earlier than most expected and in turn three issuers decided to jump in Thursday ahead of what is expected to be a crowded market next week. Financials Societe Generale (EUR2bn long 2yr vanilla and 6NC5 green senior non-preferred two-part) and Intesa Sanpaolo (EUR1.25bn 12NC7 Tier 2) provided the bulk of the day’s overall EUR3.75bn total, whilst IG corporate Bureau Veritas (EUR500m 7yr) made up the balance. Added to Monday’s EUR1bn covered from BPCE SFH that put the weekly single currency total at EUR4.75bn and still short of the average EUR5.5bn estimate given by participants in our weekly issuance poll. However, given that Thursday’s deals went smoothly and with the week’s key risk events set to be in the rear-view mirror, we wouldn’t be surprised to see another issuer or two adding to this week’s haul on Friday. See the IGM DAILY EUR NICS & BOOKS for full details of Thursday’s issues
** In non-covered FIG, the issuance window and chance to beat next week’s potential rush, proved too good an opportunity to miss for two issuers who successfully exploited the recent lack of supply to raise EUR3.25bn on books which peaked at EUR10.1bn before easing to EUR8.3bn at the final count. Societe Generale’s EUR2bn equally weighted long 2-yr vanilla/6NC5 green positive impact SNP was its first SNP sale of 2024 where the longer and ethically labelled line fared best, seeing the biggest demand (EUR3.5bn vs. EUR2bn on the long 2yr) and largest spread tightening while also landing with the tightest NIC (zero). From the periphery, Intesa Sanpaolo’s first euro Tier 2 sale since February 2023 raised a sizeable EUR1.25bn (from bmk) with the 12NC7 line attracting a EUR2.8bn final book although conceded a comparatively generous (by recent standards) 10-15bps NIC at the reoffer level. The question now is whether anyone else will look to follow ahead of the weekend and Monday’s Armistice holiday. See IGM’s FIG SNAPSHOT
** In the IG corporate market on Thursday was French certification company Bureau Veritas, and given the issuer's low-beta nature (rated A3 by Moody’s) it was seen by many as the perfect name to re-open the euro corporate market following the election and offer a litmus test of investor sentiment before next week’s potential deluge. The borrower brought a 7yr transaction which was capped at EUR500m from the outset and started around 35bps back from reoffer, before pricing was tightened 27bps during the execution process. That was on the back of solid enough demand which peaked at EUR1.4bn before settling at EUR1.15bn. For more background, see the IGM CORP SNAPSHOT
** A total of 51 public deals were issued in the European structured finance market in October, edging ahead of May’s tally, although volumes fell short at less than EUR22bn equivalent versus close to EUR27bn. The numbers were helped by busy RMBS and CLO markets (which broke the 2021 record), as well as continued activity in the auto and consumer space. See European SF: October 2024 Supply in Review
** IGM November 2024 Monthly Interest Rate Outlook: Policy easing will continue for most CB’s this year. Possibly early into next. The incoming US administration muddies the waters. Central bankers will talk about the damage tariffs will do, but they can’t set their own policy paths until the Trump administration enacts policy. Confidence regarding inflation outlooks maybe eroded as models do not deal well with the newly elevated uncertainty. Dollar moves complicate too
Friday's primary prospects
At the time of writing there were no confirmed deals for Friday's business
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Thursday's broader market developments
** It was a busy day in terms of earnings, CB speakers and data with the market extracting positives wherever possible seeing equities advancing (Stoxx600 +1%) throughout the session. EGBs were again under pressure with EC retail sales coming in ahead of expectations at 2.9% YoY (exp 1.3%) and Germany looking destined to be heading to an early election. The Dax outperformed despite that news (up 2% as the session drew near its close). Alongside a 25bps cut, BoE Governor Bailey stated that the recent budget will not impact its rate cutting trajectory and that disinflation has been quicker than expected. Key sticking point for future rate cuts appears to be services inflation which is expected to remain broadly unchanged over the next 6 months
** Stoxx600: A more positive tone prevailed and even gathered pace as the day progressed. Gains seen at the index level (+1.01% and counting) followed what was a rather indecisive session Wednesday that saw an initial 1.91% gain turned into a 0.54% loss. IT +2.63%, Communication services -0.54%
** Govvies: Bear steepening across EGBs continued but was worse in the morning session before European bonds followed the direction of Gilt and UST yields (i.e. lower although EGBs remained higher themselves on the day). Gilts were the outperformer after BoE Bailey’s comments with 2yr and 10yr yields around 7bp lower
** Data:
- CH Oct Imports missed at -2.3% (f/c -2.0%, prev 0.3%), whilst Exports big beat at 12.7% (f/c 5.0%, prev 2.4%)
- GE Sep Industrial Production missed at -2.5% MoM (f/c -1.0%, prev rev to 2.6% from 2.9%)
- GE Sep Imports/Exports both higher than exp at 2.1%/-1.7% (f/c 0.6%/-2.4%, prev rev to -2.6%/1.2%)
- GE Oct HCOB Germany Construction PMI fell to 40.2 (prev 41.7)
- SP Sep Industrial Output beat at 0.5% MoM (f/c 0.4%, prev -0.1%)
- EC Sep Retail Sales YoY beat at 2.9% (exp 1.3%, prev rev up from 0.8% to 2.4%)
- US 3Q P Nonfarm Productivity missed at 2.2% (exp 2.5%, prev rev down to 2.1%)
- US 3Q P Unit Labor Costs beat at 1.9% (exp 1.0%, prev rev up to 2.4%)
- US Weekly Initial Jobless Claims in line at 221k (exp 222k, prev 218k)
- US Weekly Continuing Claims higher than f/c at 1892k (exp 1873k, prev 1853k)
- US Sep F Wholesale Inventories lower than f/c at -0.2% (exp -0.1%, prev -0.1%)
What to watch Friday – Slow end to event-packed week
** Key Data: IT Sep Industrial Production (09:00), IT Sep Retail Sales (11:00) and US Nov P Uni of Michigan Sentiment (15:00)
** Key Events: Fed’s Vujcic (09:00), BoE’s Pill (12:15), Fed’s Bowman (16:00) & Musalem (19:30) all speak
** Auctions: No major term auctions scheduled for Friday 8th Nov
** Earnings: 9 Stoxx600 & 3 S&P500 companies report
All times GMT
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