EU CREDIT MACRO: CREDIT MACRO: Autos / Industrials / Utilities: Week in Review

The Tail That Wagged the Dog

The primary tail is wagging the secondary dog right now. If last week was more about consolidation, this week was back to full on spread rally mode. This was really evident in primary, with NIP flipping negative again and taking secondary tighter. Stellantis was the primary example with NIPs around -15 and -7 triggering a c.10bp rally in secondary.

Bulletproof

Another interesting case is Anglo American. S&P downgraded one notch to BBB last Friday. Concerns around China demand continue to weigh on commodities. AALLN brought a dual tranche € this week, which did come with c.15-18bp NIP. Those have tightened 7-8bp and secondary manages to finish the week slightly tighter. Bulletproof.

Tighter, Tighter (Almost) Everywhere

Spreads close tighter across the board, in line with the index and no real widening outliers. Earnings from Volkswagen, RWE, E.On and Vonovia were rather uneventful. Lanxess was a more interesting one, bonds underperformed a little; CDS more so. There wasn’t a lot to like there, and we feel spreads may have been saved by the strong market. Leverage is at 4.9x vs 3.5x threshold for Moody’s; getting below in a reasonable timeframe is a big ask. TenneT’s long awaited German grid sale appears to be edging closer, taking spreads 10-40 tighter. This will be an interesting one to follow with CoC optionality and consent solicitations coming into play.