• Credit spreads are wider, Brent is higher, AI equity sell-off & credit indices are rising
• Challenging session yesterday with a ‘risk-off’ sentiment carrying forward into this morning
  • The week's supply had been expected to be ‘front-loaded’ & it has been
  • Very quiet market yesterday as spreads widened & the mood turned negative
  • Only the one € IG trade, with books a challenge once again as investors pulled back
• OAT’s remained the focus as the sell-off continued.
  • 10yr OAT holding above 5.0% at 5.074%
  • OAT / Bunds spread at 10yrs sit at +174
  • Moody’s ratings review of France after the close (Aa3 negative outlook)
  • Fears of contagion loom large
• Bunds & Gilts rallied yesterday.
  • US AI equity sell-off prompted a sharp shift into Treasuries with a 15bp+ fall in yield across the curve out to 10yrs  
• Geo-political instability prevails with mid-terms fast approaching, with a shift in power on Capital Hill on the horizon.
• The European IG pipeline going into Thursday didn’t change & remains the same.
• € IG priced €600m from 1 deal (1 x FIG) via 1 tranche
  • €19.95bn WTD or 105.9% of our ‘Supply Survey’ forecast of €18.83bn
  • CIBC offered a healthy NIC of 19 to secure size
    • TD 1.21 X
• Sterling (£) delivered £1bn from 2 deals (1 x FIG & 1 x SSA) via 2 tranches
  • £1.5bn WTD or 133.3% of our ‘Supply Survey’ forecast of £1.13bn
  • Book multiples struggled
    • TD 1.22 X
    • NRW Bank 1.08 X
• Swiss Franc priced Chf150m from 1 deal (1 x FIG) via 1 tranche
  • TD simultaneously brought a £ covered deal
• There were no trades in the US$ Reg S market
• Brent Crude rose again to a 5mth high (4th May) on geo-political developments, currently trading at c.$114.03 (c.$111.15 this time yesterday).
• The VIX widened, currently set to open at 19.03 (16.68 this time yesterday).
• iTraxx 5yr Europe & iTraxx Senior & Sub financial indices widened sharply & are set to open at 66.902 (+3.73%), 76.528 (+5.12%) & 130.885 (+6.63%) respectively (% △ to this point yesterday).
• Pipeline: The European IG pipeline is as follows (unchanged from Wednesday's close). 
  • 1 x € Corp
  • 1 x € FIG (1 x Subordinated)
  • 2 x € SSA (1 x Inaugural Green Oct 23rd earliest & 1 x Inaugural DNN)
  • 1 x £ FIG

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

Key € IG Supply Stats for Yesterday

• Corporate
  • Total IG: €0
  • Avg. tranche size €0
  • Avg. IPT to Pricing NA 
  • Avg. cover NA
• FIG
  • Total IG: €600m
  • Avg. tranche size €600m
  • Avg. IPT to Pricing  (covered) €0
  • Avg. IPT to Pricing -20 (unsecured) €600m
  • Avg. cover 1.21 X
• SSA
  • Total IG: €0
  • Avg. tranche size €0
  • Avg. IPT to Pricing NA
  • Avg. cover NA

Geo-Political News

• Brent Crude Rose Sharply Following Houthi Strikes on Saudi Aramco Brent crude surged to a 5 mth high following intensified drone & missile strikes by Houthi forces targeting critical Saudi Aramco infrastructure. The escalation comes as Iran & its proxies seek to exert geopolitical leverage ahead of upcoming US midterm elections, exploiting leverage on global supply chains. The heightened frequency of attacks signals a broader effort to destabilise energy security across the Arabian Peninsula. The escalating conflict threatens to disrupt crude exports & amplify inflationary pressures globally.
• Starlink Satellite Comms Restored to Ukrainian Forces Trump announced that Elon Musk has officially reinstated full access to SpaceX's Starlink satellite internet network across Ukraine. The communications network serves as an essential technological backbone for modern operational warfare, enabling real-time battlefield intelligence, secure command links, & unmanned aerial vehicle operations across Eastern European frontline sectors. Military planners in Kyiv emphasised that consistent orbital connectivity is vital for defending critical national infrastructure & sustaining defensive manoeuvres against opposing forces. The restoration resolves weeks of operational uncertainty surrounding commercial satellite access in conflict zones. Trump refused to answer questions regarding who limited access & who chose to reinstate it.
• Canada & Turkey Launch Strategic Trade Talks Diplomatic delegations from Canada & Turkey formally opened bilateral trade negotiations in Ankara, aiming to establish a comprehensive free-trade framework & deepen economic integration. Canadian Prime Minister Mark Carney & Turkish President Recep Tayyip Erdogan announced a strategic partnership focused on expanding commercial ties across key sectors, including civil aviation, renewable energy, defence production, & technology. The discussions mark a pivotal effort by Ottawa to diversify international commercial alliances & reduce economic reliance on the US. Turkish economic ministers highlighted the potential for substantial bilateral growth in industrial equipment, critical minerals, & agricultural exports. Both nations reaffirmed their commitment to reducing tariffs & streamlining regulatory standards, with technical working groups scheduling follow-up sessions to draft initial treaty chapters over the coming months.
• Global AI Equities Hit Hard on Capex Spend Concerns Sharp corrections in tech equities following quarterly earnings releases from major digital corporations, including Meta, which highlighted massive surges in planned AI capex. Executive teams across Silicon Valley reaffirmed heavy infrastructure investments, raising widespread concern among global institutional investors regarding delayed profitability & margin compression. Corporate spending on advanced semiconductor hardware & data centre facilities continues to outpace near-term revenue generation, triggering significant selloffs across international tech indices. Portfolio managers are re-evaluating software sector valuations as the broader tech ecosystem faces heightened scrutiny over monetization timelines.
• France Prepares for a Weekend of Social Unrest Security services in France are mobilizing extensive law enforcement personnel in anticipation of further widespread civil protests across major city centres this weekend. Simultaneously, international financial markets remain focused on sovereign debt metrics as Moody's prepares to issue its updated credit rating evaluation for the French government after market close today. Public discontent stems from proposed fiscal austerity measures & ongoing economic reforms designed to curb mounting budgetary deficits. French treasury officials are closely monitoring sovereign borrowing costs, given that any prospective credit rating downgrade could elevate yields yet further. Leadership in Paris maintains that structural spending adjustments are vital for long-term fiscal stability, even as domestic labour unions call for expanded strike actions across key public transportation networks.
• Severe Earthquake Strikes High-Altitude Region of Northern Tibet A powerful magnitude 7.0 earthquake struck the northern region of Nagqu within Tibet, causing severe structural damage & localized infrastructure destruction across high-altitude communities. Severe aftershocks continue to shake the Tibetan Plateau, triggering rockfalls that disrupted vital transport links along National Highway 317. Seismic monitoring authorities in Beijing noted that the deep structural faulting event affected vast unpopulated expanses, though emergency personnel continue clearing debris & establishing temporary medical housing for displaced residents across affected townships.

Markets

• US Equity closed sharply lower as broad-based tech weakness pressured financial markets. Capex concerns surrounding high-profile corporate earnings triggered heavy selling in large-cap tech stocks, dampening overall risk appetite across Wall Street. Sector rotation away from high-beta growth assets into defensive corners provided minimal relief to broad benchmarks. Consequently, the Dow was effectively flat (up 0.02%) to close at 52,868, while the S&P shed -1.21% to finish at 7,663. Meanwhile, heavy liquidations across semiconductor & software names dragged the Nasdaq down by -2.60% to end the session at 26,009.
• Asian Equity bourses are mixed as regional investors digest overnight losses on Wall Street. Broader negative tech sentiment weighs heavily on industrial benchmarks, though selective buying in property & financial counters offers localized support. The Nikkei is trading down by -1.05% at 62,249 amid persistent weakness in semiconductor exporters, while the Kospi tracks lower by -0.48% to stand at 5,507 due to broader tech liquidations. Conversely, the Hang Seng trades up by +0.58% at 23,067, supported by domestic real estate gains & regional consumer inflows.
• European & UK Equity futures point to a subdued open as regional markets absorb negative spillovers from overnight selloffs in US tech. Heightened fiscal uncertainty in France & elevated energy prices keep market participants cautious ahead of the open. FTSE futures trade down by -0.08%, indicating a muted start for UK blue chips. Meanwhile, DAX futures drop by -0.35% as German industrial exposures face headwind pressures, & CAC 40 futures slide by -1.47% amid heightened political tensions & sovereign credit rating anxiety ahead of the Moody’s announcement post close today.
• UK & Eurozone Bond Markets European sovereign debt markets navigate shifting yield dynamics amid elevated global inflation risks & fiscal scrutiny. Yields across the continent show modest structural shifts, with the 10yr Bund trading at 3.334% following a prior session level of 3.42%, compared to 3.424% last week. France remains the key story & focus with the 10yr OAT yield standing at 5.074% against 5.011% on Thursday & 4.8% last week, reflecting heightened fiscal focus ahead of the Moody’s sovereign rating assessment. Meanwhile, the 10yr Gilt yielded 5.326%, down from 5.414% in the previous session & 5.369% last week, as debt managers monitor broader fixed-income duration flows.
• Currency Snapshot:
  • Sterling trades at 1.338 against the US dollar, slipping from 1.34 in the prior session but showing sustained strengthening compared to last week when it stood at 1.333. Against the euro, Sterling stands at 0.837, ticking up from 0.837 in the previous session & strengthening compared to last week at 0.843, driven by resilient domestic interest rate expectations.
  • Euro trades at 1.121 against the US dollar, softening from 1.122 yesterday & easing compared to last week at 1.124. Against the Swiss Franc, the Euro trades at 0.921, rising slightly from 0.920 previously while remaining weaker compared to last week at 0.926, as Eurozone fiscal concerns weigh on common currency sentiment.
  • Swiss Franc trades at 0.822 per US dollar, softening from 0.821 in the prior session & easing compared to last week at 0.824. The currency maintains firm underlying support as regional safe-haven demand remains elevated amid ongoing geopolitical tensions across global markets.

Economic Data (Western European Today)

Govt Bond Auctions (Western European Today)

• None.

Holidays

• There are no public or national holidays scheduled across the UK, & the Eurozone for the remainder of this week. The next holidays scheduled are as follows.
  • Eurozone - Next: 1st November (All Saints Day) - Sunday
  • UK - Next: Christmas Day (25 December) & Boxing Day (26 December).
  • USA - Next: 11th November (Veterans Day) & 26th November (Thanksgiving)

Pending Deals & Mandates

Euros (€)

• 19th October: Gek Terna S.A. (rated Baa3 / BBB- by Moody’s & S&P), the vertically integrated leading infrastructure group in Greece, owning & operating critical concessions in the country, mandated BNP Paribas S.A., JP Morgan S.E. & Mediobanca – Banca di Credito Finanziario S.p.A as Joint Global Coordinators & Joint Bookrunners along with AXIA, Deutsche Bank, Eurobank S.A., Goldman Sachs Bank Europe SE, HSBC, Morgan Stanley, National Bank of Greece, Piraeus Bank S.A. & Optima bank S.A. as Joint Bookrunners to arrange a series of fixed income investor calls starting on Monday the 19th October.

• 19th October: Sumitomo Life Insurance Company (exp. Issue ratings of A- / A- by S&P & Fitch) mandated JP Morgan, BofA Securities, Goldman Sachs, SMBC Nikko & BNP Paribas to arrange a series of fixed income investor conference calls commencing Monday the 19th October. JP Morgan will be coordinating logistics. A potential € benchmark, Reg S, Fixed to fixed, step-up 30NC10 callable subordinated bond offering will follow, subject to market conditions.

• 16th October: The Free and Hanseatic City of Hamburg (rated AAA / AAA by Fitch & Scope) mandated DZ Bank as ESG Structuring Coordinator & Crédit Agricole CIB, Danske Bank, DekaBank, Deutsche Bank & DZ Bank as Joint Lead Managers for its upcoming inaugural €500m (wng) 10yr Green senior unsecured offering in LSA format. The transaction will be launched in the near future, subject to market conditions & after extensive investor calls taking place between Monday the 19th of October & Thursday the 22nd of October.
• 21st October: European Stability Mechanism (ESM) (rated Aaa / AAA / AAA / AAA by Moody’s, S&P, Fitch & Scope) appointed DZ Bank & Société Generale as Digital Advisory Banks & mandated DZ Bank, HSBC, Santander & Société Generale to joint lead manage an inaugural Digitally Native Note transaction maturing in April 2030. No further group. The Digitally Native Notes will be issued on a distributed ledger technology (DLT) platform operated by Clearstream Europe AG (D7 DLT Platform) & in the context of the Eurosystem's Pontes initiative. The Digitally Native Notes are eligible for clearance & settlement through all traditional Clearstream Banking & Euroclear Bank SA/NV rails. A € benchmark transaction will follow subject to market conditions.

Sterling (£)

• 20th October: BTG Pactual Europe SA (rated Baa3 by Moody’s) mandated BMO Capital Markets as Sole Global Coordinator & Joint Lead Manager, alongside Natixis & Banco BTG Pactual S.A. – Cayman Branch as Joint Lead Managers, for its upcoming inaugural £250m (wng) 3yr Senior transaction. The Issuer is available for one-on-one calls upon request on the 20th & 21st of October. The transaction is expected to launch in the near future, subject to market conditions.

Recent Supply Data

Key Market Data