DAILY CLOSE: Primary in summer doldrums
** The European bond market was predictably slow this week given the pickup in corporate earnings and the onset of summer holidays. Also weighing was acute tech-led weakness in equity markets which shut issuance windows for any issuers which were potentially looking to chance their arm. Four names did manage to get euro deals away this week for a combined EUR1.375bn, making it the lowest single currency volume week of the year by some distance. See the IGM WEEKLY VOLUME
** Land Schleswig Holstein provided the only euro-denominated SSA issuance of the week via a new EUR500m 8yr LSA. Order books peaked and finalised at EUR615m with the deal pricing with a NIC of 1bp. In sterling, the Inter-American Development Bank (IADB) printed a GBP250m 5yr, upsized by 50m from earlier expectations despite orders only stretching to GBP225m. The issuer went on to print one of two USD1bn sized SOFR linked FRN's with its 5yr maturity coming one day after Export Development Canada printed a 4yr equivalent. Expectations for next week are limited to say the least with a return for significant levels of issuance not anticipated before the 3rd week of August as per previous years
** Saving the non-covered FIG market from a blank was Mitsubishi HC Capital Inc via a EUR500m no grow 3yr fixed senior unsecured line on Tuesday. As a reminder, leads shaved 30bps off m/s +105a IPTs to land the deal with a NIC in the region of 8bps after books totalled EUR1.25bn (EUR1.45bn peak), a weaker demand outcome compared to its prior EUR500m 3yr fixed sale in January which attracted a EUR2.75bn book. Many more potential issuers are now out of blackout periods having announced earnings this week, but we are not expecting many (if any) to act soon given the summer holidays
** The IG corporate market recorded its first weekly euro issuance blank of the year this week although given seasonal factors, the earnings deluge and a far from ideal broader market backdrop, that came as no real surprise. Indeed, pickings are expected to be slim at best in primary given summer vacations, with the market traditionally not getting back into swing until toward the end of August. We did at least see some movement in the sterling market this week with UK water company Severn Trent Water Limited bringing a senior unsecured sustainable notes offering. Looking to replicate the success of the issue is peer South West Water which is wrapping up a roadshow Friday ahead of a GBP 17yr green benchmark expected next week
** With the summer lull in full swing, four issuers executed EUR2.14bn equivalent (30.73% of total issuance) in ESG funding across five tranches. Dollars were in the driving seat via 3 tranches with credit due to IADB for offering the week's largest deal size (a USD1bn sustainability line). ESG corporate activity came from Severn Trent Utilities Finance, which attracted the largest orderbook of the week on the same day that peer Thames Water's CFR was downgraded to junk at Moody's. See IGM's Europe Credit ESG Weekly
IGM Credit Excel spreadsheets and reports
** The IGM European Weekly Credit Overview is your comprehensive round-up of primary European new issue activity including pricing, order book information, new issue concessions and ISINs
** The IGM European Weekly Cheat Sheet provides proprietary intelligence on Euro primary market trends using various key data points in an easily digestible Excel spreadsheet. This includes Euro new issue volumes, average new issue concessions and book cover ratios across asset classes, as well as other key credit proxies
** The IGM Roadshow Calendar is your one stop window on who, when and where. The calendar view provides an instant snapshot of which days are already earmarked for meetings in a convenient PDF format, with clickable links that take you directly to the known schedule
Friday's broader market developments
** European stocks bucked the recent weakening trend with daily gains that were undeterred by the US's latest print of PCE inflation numbers. There was a marginal upside surprise for the June PCE core index which came +10bp versus consensus whilst headline numbers met expectations. That should ensure that the Fed's narrative is maintained and could mean a signalling at the coming week's meeting that a rate cut is indeed coming in September. The OIS market is pricing in almost certainty of a 25bp rate cut to come in September (an implied cut of 26bp in fact). Ahead of the PCE print, on the European side of the pond, ECB 1yr/3yr CPI Expectations came at 2.8% and 2.3% respectively. That keeps the trend lower intact and whilst the former is probably too elevated for the ECB's liking, the latter shows inflation expectations remain well anchored
** Stoxx600: Up as much as 0.67% but index gave a small portion back since PCE figures. IT rebounded after recent weakness (+0.72%) but index led higher by industrials and healthcare
** Govvies: EGB yields were 1-3bp higher in the morning but caught a bid in the afternoon with yields lower right across the board with outperformance at the front end. Gilt yields also lower but 10yr leading the way whilst USTs saw a more parallel move across the curve
** Data:
- JN Jul Tokyo CPI lower than f/c at 2.2% (exp 2.3%, prev 2.3%)
- FR Jul Consumer Confidence higher than expected at 91 (exp 90, prev revised up to 90)
- SP Q2 Unemployment Rate fell to 11.27% (prev 12.29%)
- ECB 1yr/3yr CPI Expectations came at 2.8% / 2.3% signalling an anchoring of inflation expectations
- IT Jul Consumer/Manufacturing Index both ahead of f/c at 98.9 / 87.6 (exp 98.7 / 87.3)
- US Jun Personal Income lower than f/c at 0.2% (exp 0.4%, prev revised down to 0.4%)
- US Jun Personal Spending in line at 0.4% (prev revised up to 0.4%)
- US Jun Core PCE Price Index in line at 2.5% (core slightly higher than f/c at 2.6%, exp 2.5%)
- US Jul F Uni of Michigan Sentiment broadly in line with f/c at 66.4 (exp 66.5, prev 66.0)
What to watch Monday (and for the week)
** Key Data: UK Jun Mortgage Approvals (09:30), UK Jun M4 Money Supply (09:30), UK Jul CBI Retailing Reported Sales (11:00) and US Jul Dallas Fed Manufacturing Activity (15:30)
** Key Events: No headline events scheduled for Monday 29th Jul
** Auctions: No major term auctions scheduled for Monday 29th Jul
** Earnings: 6 Stoxx600 & 9 S&P500 companies report
** Viewpoint - The week ahead:
- July FOMC (Tuesday-Wednesday). No rate cut. No SEP. Powell presser tone in focus
- BoJ to hike (Wednesday)? Bond buy cuts? Updated projections
- New UK Chancellor presents public finances audit (Monday). BoE to cut (Thursday)? New MPR/presser
- US June JOLTS/July consumer confidence (Tue). Q2 ECI (Wed). July Employment Report (Fri)
- EMU + Big Four Q2 GDP (Tue). German/Spanish (Tue), French/Italian/EMU (Wed) prelim July CPI
- Australia June/Q2 CPI & June/Q2 retail sales (Wednesday). Q2 PPI (Friday)
All times BST
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