EUROBONDS: Primary Activity Muted, Euro-Zone Data Disappoints
March 15 2012 - 9:59AM
Dow Jones News
The European primary bond market was muted Thursday with only a
handful of deals emerging, while the cost of insuring European debt
against default was mostly higher.
First in the primary Thursday was BNP Paribas Home Loan SFH
(BNP.FR), the French lender's covered bond issuing unit. It's to
price its EUR1 billion, 10-year deal at 85 basis points over
midswaps, tighter than initial guidance in the area of 90 basis
points.
In the corporate space was French-Dutch real-estate company
Unibail-Rodamco SA (UL.FR). It set pricing on its euro-denominated,
benchmark-size, seven-year bond at 105 to 110 basis points over
midswaps.
Spanish construction company Obrascon Huarte Lain SA (OHL.MC) is
planning a new EUR300 million eight-year bond. The high-yield bond
will be priced later Thursday. It's non-callable for four
years.
At the same time, the company is buying back up to EUR300
million of its existing EUR700 million, 7.375% bond maturing 2015,
the company said in a statement. The repurchase price is 105.50% of
the bond's face value. The offer is due to expire March 23.
Obrascon Huarte Lain said the tender is part of an exercise to
manage its bond redemptions and extend the average maturity of its
debt. Any bonds that are bought back will be cancelled and won't be
reissued or resold, the company said.
Elsewhere, the cost of insuring European sovereign and corporate
debt mostly rose, while data from the European Union indicated that
consumption and confidence remain weak due to declining employment
and falling real wages in the euro zone. Data showed that
employment declined 0.2% both on the quarter and on the year in the
final three months of last year.
Around 1250 GMT, the SovX Western Europe index, which investors
can use to buy or sell credit default swaps on a basket of
sovereign borrowers, was at 225/229 basis points, three basis point
wider than Wednesday's close. The index is now being quoted without
Greece, according to data-provider Markit.
Credit default swaps are derivatives that function like a
default insurance contract for debt. If a borrower defaults,
sellers compensate buyers.
The iTraxx Europe index, which comprises 125 high-grade
borrowers, 25 of which are banks and insurers, was at 126/127 basis
points, unchanged from Wednesday's close, according to data
provider Markit.
The Crossover index of 40 mostly sub-investment-grade European
corporate borrowers was four basis points wider at 557/560 basis
points.
-By Sarka Halas, Dow Jones Newswires; +44 (0) 207 842 9436;
sarka.halasova@dowjones.com
(Ben Edwards and Serena Ruffoni in London contributed to this
report)