• With sentiment today very much ‘risk-off’ we again had no deals in the € IG, £, Chf & US$ Reg S markets. The first back-to-back zero print € IG sessions since the 5th & 6th of August (Wed/Thur).
• The stronger than expected US CPI for August (0.3% vs exp. of 0.2% MoM) fuelled inflationary fears & increased the likelihood of additional rate hikes by the Fed next Wednesday - US CPI YoY data in line with expectations at 3.4%.
• It is the turn of Eurozone CPI data next week (Wednesday), so issuance is once again expected to be largely front-loaded.
• In addition to the Fed next week, we have the Bank of England due to make their rate decision on Thursday. Consensus for the MPC decision is ‘hold’; with an outside risk to the upside.
• Rate moves & sentiment will shape activity with some participants expecting robust EGB supply.
• Corporate supply forecasts for next week (full survey results below) are closely aligned within a tight range (€11bn to €12bn), with all inputs not including rumours of one of the hyperscalers, which would clearly skew numbers significantly.
• Today’s “Talking Point” (below) maps the iTraxx Europe Index against the price of Brent Crude since the start of the year.
• iTraxx Europe & the iTraxx Senior & Sub financial indices have had a mercurial session, all currently lower on the session by -1.46%, -1.47% & -1.83% respectively (as we print).
• Having bounced off $110 heading into the morning, Brent crude fell steadily throughout the day heading towards the US CPI release, which surprised to the upside; currently trading at c.$104.19 (c.$105.51 this morning).
• European equity bourses have staged a mild rebound into the green after yesterday's sell-off, with the FTSE, Dax & CAC 40 all higher by +0.83%, +0.67% & +0.92% respectively.
• A breakdown of today’s primary € supply is as follows.
  • Corporate
    • Total IG: €0
    • Avg. tranche size €0
    • Avg. IPT to Pricing NA
    • Avg. cover NA
  • FIG
    • Total IG: €0n
    • Avg. tranche size €0
    • Avg. IPT to Pricing NA (covered) - €0
    • Avg. IPT to Pricing NA (unsecured) - €0
    • Avg. cover NA
  • SSA
    • Total IG: €0
    • Avg. tranche size €0
    • Avg. IPT to Pricing NA
    • Avg. cover NA

• Pipeline: The European IG pipeline has just the one trade scheduled for Tuesday at the earliest.
  • 1 x € SSA (1 x EuGB)

Contact Stuart Aylward with questions or comments on stuart@creditflowresearch.com

Supply Survey For Next Week

• Thank you to all who participated in our ‘Weekly Supply Survey’. Forecasts indicate €40.25bn of primary IG supply.

  
  

Talking Point

• The chart below plots the iTraxx Europe Index against Brent Crude YTD.
  • The index consists of 125 European IG Corps (inc. financials, industrials, utilities, consumer staples, energy & coms.)
• Prior to the US/Iran conflict at the end of Feb, both series were subdued & range-bound, with the iTraxx Europe near 50 & Brent in the c.$60-72 range.
• The immediate shock was sharp & closely synchronised, with the index widening to a peak of 73.46 on the 27th of March (+c.47% to pre-conflict), while Brent hit c.$118.35.
• The tight positive correlation between the two series in the immediate aftermath reflects the market's simultaneous repricing of credit risk, given the disruption to oil supply.
• From early April, however, the two series decoupled, with ‘credit’ adapting quickly to elevated oil prices. The European index compressed quickly, back toward pre-conflict levels. At the time this was mostly in part to a broader expectation that the conflict would be resolved sooner rather than later.
• As the prospect of peace dissipated from early August, Brent has again surged from c.$80 to $110 overnight (+37.5%), yet the index has remained remarkably resilient, mirroring direction trends only, & not magnitude.
• This normalisation of credit spreads has allowed the primary markets to thrive, with an unwavering wall of new issues. The sharp spike in Brent, & the deterioration of the broader Middle Eastern picture, over the last 48 hours has been profound, ensuring no deals yesterday & today & a ‘risk-off’ mood (ECB aside).
• That said, on a relative basis credit spreads & the index remain tight & forecasts for next week's IG supply look to be even higher than this week.

Euro IG (today)

• None

Week-to-date volumes:

Year-to-date volumes:

Sterling IG (today)

• None

Week-to-date volumes:

Year-to-date volumes:

Swiss Franc IG (today)

• None

Week-to-date volumes:

US$ Reg S (today)

• None

Pending Deals & Mandates

Euro (€)

• 11th September: The State of Baden-Wuerttemberg (rated Aaa / AA+ / AAA by Moodys, S&P & Scope) mandated Deutsche Bank & DZ Bank as Joint ESG Structuring Coordinators & BNP Paribas, Crédit Agricole CIB, Deutsche Bank, DZ Bank, LBBW & Nordea as Joint Lead Managers for its upcoming inaugural €600m (wng), 10yr, European Green Bond ‘EuGB’ LSA format. The transaction will be launched in the near future, subject to market conditions. The target market for the bonds are retail, professional & eligible counterparties, each as defined in MiFID II & UK MiFIR product governance (all channels for distribution of the Bonds are appropriate).

• To view the LIVE / REAL TIME European IG pipeline please click here.
• Details correct at time of posting