EU REAL ESTATE: Property: Week in Review
Another positive week for Real Estate with spreads 1.5bps better. Results for Vonovia and Simon Property were slightly positive. CapitaLand Ascendas was neutral.
• Global Switch 30s were the clear outperformer with a 32bps rally. The bonds are screening roughly flat to mid-swaps as the 30s face a binary outcome. A mooted takeover by SC Capital and Warburg Pincus would probably trigger either a CoC Put at Par or a Make-Whole Call at Par. The bonds are protected by a leverage clause limiting Total Net Debt / Total Assets below 50% which might force the MWC. The CoC Put is contingent on the loss of Investment Grade. We did note that SC Capital prefers to run leverage of 45-50% LTV according to an old interview but rating agencies thresholds are quite restrictive for the data centre space given the lack of alternative use. Upside is 4.75pts; downside of 2+ points though the bond was trading rich vs DLR/EQIX before this talk.
• CityCon benefited from an upward revaluation of almost its entire portfolio. Credit and business metrics were all slightly positive.
• Vonovia’s results showed the strength of its development business.
• Alstria Office results were in line. It was very active in signing new and renewed leases. Worth watching the absolute level of vacancies as opposed to the EPRA economic number. Around 21% of its properties currently have no tenant when developments are also considered.
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EQUITY OPTIONS: Long Dated EU Bank Strangle
SX7E (15/12/28) 150/250^^, bought for 28.3 in 12k vs ~6.5k at 210.00.
MNI: US MBA: MARKET COMPOSITE +9.4% SA THRU JUL 04 WK
- MNI: US MBA: MARKET COMPOSITE +9.4% SA THRU JUL 04 WK
OUTLOOK: Price Signal Summary - Monitoring Support In Gold
- On the commodity front, recent weakness in Gold resulted in a breach of the 50-day EMA, and a trendline drawn from the Dec 30 ‘24 low and connected to the Feb 28 low. A clear break of both trend tools would signal scope for a deeper correction, and open $3245.5, May 29 low. Note, the recovery from the Jun 30 low also highlights a possible false trendline break. A resumption of gains would refocus attention on $3451.3, Jun 16 high. The bear trigger is $3248.7, Jun 30 low. First resistance is $3365.80, the Jul 3 high.
- In the oil space, WTI futures maintain a softer tone following the reversal from the Jun 23 high, and recent gains still appear corrective. Support to watch is the 50-day EMA, at $65.09. The average has been pierced, a clear break of it would signal scope for a deeper retracement. This would expose $58.87, the May 30 low. Initial resistance to watch is $71.20, the 50.0% retracement of the Jun 23 - 24 high-low range. Key resistance is at $78.40, the Jun 23 high.
