EU REAL ESTATE: Derwent (DLNLN: A- Fitch) New Issue Guidance
• Guidance: £250m 7yr UKT+105-110 wpir
• Books >£740m
• IPT: £Bmk 7yr UKT +125a
• FV: we see UKT +105 to give z+139.
• Existing 31s UKT +95 are z+137. Gilt spread probably matters more here than Z spread. Curves for O, LONQUA and NBHA are close to flat on a Gilt basis but we would be reluctant to go tighter on Z spread than the 31s particularly given the very low cash price (81.25 area).
• Note: coupon is Semi-Annual unlike DLNLN 31s (Annual)
• High quality office buildings mainly in Central London's West End (Fitzrovia mainly). £5bn GAV (£4.7bn unencumbered); 91% Offices; Vacancy 3.4% is low; WAULT is long at 6.8yrs; LTV low at 29.6%; ICR 3.5x; ND/E 9.3x.
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Historical bullets
GILTS: Seeing some upside traction
- Gilt is seeing further upside traction, the initial move happened on the Open, as the DMO revised its gilt remit surprisingly lower, this was followed by a quite poor set of Prelim PMIs.
- The pure next Technical level comes at 93.44 76.4% retracement of the Apr 7-9 sell-off.
But looking at Yield terms, next supports are seen at:
- 4.460% = 93.39.
- 4.363% = 94.27 (April and 2025 low).
(Chart source: MNI/Bloomberg).
US TSY FUTURES: BLOCK: Jun'25 5Y Buy
- +6,500 FVM5 108-10.5, buy through 108-10.25 post time offer at 0653:38ET, DV01 $266,000. The 5Y contract trades 111-05 last
EU-BOND AUCTION PREVIEW: On offer next week
The EU has announced it will be looking to sell the following at its auction next Monday, April 28:
- Up to E2.5bln of the 2.875% Oct-29 EU-bond (ISIN: EU000A3L1CN4)
- Up to E2.0bln of the 3.00% Dec-34 EU-bond (ISIN: EU000A3K4ES4)
- Up to E1.5bln of the 3.375% Oct-38 EU-bond (ISIN: EU000A3K4D74)
This is the first EU-bond triple tranche auction (as expected), as the EU continues to mature as an issuer. Every EU-bond auction preceding this since September 2022 has been a dual-line auction.
