EU CREDIT SUPPLY: Lufthansa Perps (LHAGR: JrSub Ba1/BB/BB): FV 5.25%
IPT: EUR BMK 30NC6 Hybrid 5.75%a
FV: Wide range on Sub_Sen: VW Baa2 Sub_Sen +220a; Accor BB Sub_Sen +106
LUFTHA Senior curve has 1k retail denominations for the 4% 30 and 4.125% 32. Interpolating would give Senior Z=118bps but where would an Institutional bond with 100k denoms trade ?
IAGLN 29s were z+105 pre-tender for 4yr; 6yr EZJLN 31s ia z+117. AFFP 29s z+166. Probably puts LHAGR 6yr at z+135a.
If we take 135a for a 100k Denom Senior, then IPT Sub_Sen is 200bps (5.75% - 2.39% swap = z+336 - 135bps = 201 bps)
FV Sub_Sen for Lufthansa, if we take 150bps then that puts FV @ 5.25%
(Swap 2.39% + 135bps Senior + 150bps Sub_Sen)
LUFTHA was recently upgraded but still has cost control issues and is relying on finding €1.5bn improvements by 2026 to justify ratings.
Piri's note from yesterday:
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EQUITIES: Estoxx Synth Option trade
SX5E (20th June) 5000, bought the call for 0.10 in 3k (100del).
FOREX: FX Exchange traded Rolls
There's some small activity in the FX Exchange traded roll, this should start to pick up, as some Desks could favour taking advantage of the quieter Markets ahead of the US CPI and the ECB, expiry is next Monday 16th:
Roll pace:
- EUR: 11%.
- GBP: 12%.
- JPY: 22%.
- CHF: 5%.
- CAD: 11%.
- AUD: 7%.
- NZD: 7%.
EGBS: 10-year OAT/Bund Tighter Alongside Broader EGBs, Politics Still In Focus
- Further to the above, political machinations in France following last week’s no confidence vote remain a key focus for EGB markets. The 10-year OAT/Bund spread is ~0.5bp tighter today at 76bps.
- President Macron is set to meet with parliamentary groups this morning, with Le Parisien reporting that he hopes to name a PM tomorrow.
- Meanwhile, Budget Minister Saint-Martin has announced that the special law to keep the state running into the next year is “ready”.
- Although the 10-year OAT/Bund spread narrowed ~10bps from wides on a lack of further political escalation last week, the political and fiscal situation in France remains fragile, likely limiting the scope for further compression for now.
- Broader 10-year EGB spreads to Bunds continue to trade tighter this morning, but have moved away from from lowest levels as the China-driven bid in European equity futures fades a little.
