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Diverging Paths

10 February 2017 by lberuti

Once again, over the last week, much attention has been paid to macro factors and political uncertainties across Europe have generated many headlines and credit index moves. It would be easy to forget that the reporting season has not reached an end yet. Investors managed to stay focused though, and the dispersion in the weekly performance of risk premia shows it. Among the winners, MTNA ( ArcelorMittal SA ) announced results that came ahead of expectations. The company said net debt decreased by $4.6Bln to $11Bln at year-end. They added that they will not pay a dividend and stated that a return to investment grade will be a priority. That was music to credit investors’ ears, and they rewarded MTNA by shaving 26bps from its 5-year risk premium. Among the losers, NEWLOK (New Look Senior Issuer Plc) reported numbers that were pretty much at the bottom end of market’s expectations. They also gave a cautious outlook and warned of challenging conditions for next year. It came after S&P downgraded Matalan further into high yield territory to CCC last week, and Moody’s changed the outlook of House of Fraser. The confirmation of the poor prospects of the UK retailers convinced investors to remark the whole sector wider and NEWLOK’s 5-year risk premium shot up 100bps.