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All Over The Place

29 November 2016 by lberuti

Today was a busy session in terms of reporting in the European High Yield universe. Earnings usually have a far bigger impact on the risk premia of these names than they have on the risk premia of corporates rated investment grade. This was proven true today. If the average spread of the constituents of iTraxx Crossover was hardly changed of the day, the dispersion among them was impressive. QUIBB (Financiere Quick) reported better than expected results and during their call with analysts, the management stuck to their original plan regarding the roll out of the Burger King restaurants for 2017. That sent QUIBB’s 5-year CDS a whopping 137bps tighter at 1,278bps. At the other end of the spectrum, GALAPG (Galapagos Holding S.A.), the company which manufactures and sells heat exchangers for industrial applications, surprised the market negatively with a 37.8% decrease of order intake, flat revenues, adjusted EBITDA down 51.5% and gross margin down from 27% a year ago to 20% now. It confirmed investors’ concerns that the backlog was booked with lower profit projects. GALAPG’s 5-year risk premium was pushed 178bps wider at 1,128bps. Meanwhile, the broader credit market was reassured by headlines regarding the ECB willing to step in to buy Italian government bonds in case of a “NO” vote on Sunday. iTraxx Financials Senior duly outperformed the rest of the market and finished the day 3bps tighter at 106.5bps, while iTraxx Main closed 2bps tighter 80bps and iTraxx Crossover 3bps tighter at 339bps.