By Sarka Halas
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)–European corporate and bank issuers took advantage of stronger market sentiment Thursday, continuing the activity seen earlier this week in the primary bond market, while the costs of insuring European corporate debt against default fell.
Earlier this week, markets were roiled on the back of developments in Spain. After a proposed EUR19 billion Madrid-backed bailout plan for Bankia SA, investors feared the costs of restructuring Spanish banks would prove too much for the country, already battling stringent fiscal targets and a sliding economy.
Sentiment was boosted Thursday by data showing that euro-zone inflation slowed more than expected in May to 2.4% from 2.6% in April, giving the European Central Bank more flexibility in terms of loosening its monetary stance.
In the primary market, French construction materials group Compagnie de Saint-Gobain SA (SGO.FR) is to price its EUR750 million, nine-year bond at 200 basis points over midswaps. This is tighter than initial guidance in the area of 205 basis points over midswaps.
Also in France, Aeroports de Paris has priced its two-part, senior unsecured bond. Pricing of the EUR300 million, seven-year bond was at 97 basis points over midswaps, and pricing on the EUR500 million, 12-year bond was 135 basis points over midswaps; both are tighter than initial price guidance.
In the sterling-denominated market, U.K. lender Clydesdale Bank PLC is to price a two-part covered bond, with the GBP400 million, 3-year bond at 170 basis points over the three-month Libor, which is tighter than initial price guidance of 170-175 basis points, and its GBP700 million 14-year fixed-rate tranche at 270 basis points over the 5% 2025 gilt, also tighter than initial price guidance of 270-275 basis points over gilts.
German lender Deutsche Bank AG (DB) has priced its EUR500 million, 10-year covered bond at 12 basis points over midswaps, having been revised tighter from 14 basis points.
Norway’s state-owned Kommunalbanken has set pricing on its dollar-denominated, benchmark-sized, five-year bond in the area of 50 basis points over midswaps.
The cost of insuring corporate debt against default fell Thursday as markets rebounded on the back of stronger than expected euro zone inflation data after a torrid day’s trading Wednesday.
At 1200 GMT, the iTraxx Europe index, which comprises 125 high-grade borrowers, 25 of which are banks and insurers, widened to 176/177 basis points, one basis point tighter from Tuesday’s close, while the Crossover index of 40 mostly sub-investment-grade European corporate borrowers was four basis points tighter at 714/717 basis points.
-By Sarka Halas, Dow Jones Newswires; +44 (0) 207 842 9236; sarka.halasova@dowjones.com
(Ben Edwards in London contributed to this report)
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