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Wider and Steeper

16 January 2018 by lberuti

The primary calendar has been reasonably busy since the start of the year. In Europe, it looks as if investment bankers have been putting a particular effort in bringing deals in the High Yield space since the beginning of the week. SELNSW (Selecta Group BV) - which operates coffee, drink and snack vending machines – and MTNLN (Matalan) – the out-of-town clothes retailer which trades from locations in the UK – both announced plans to refinance their current debt stacks. SELNSW will issue a total of €1.3Bln in a 4-tranch deal denominated in euros, Swedish Kronas and Swiss Francs maturing in 6 years. MTNLN will issue £480mln split between 5-year and 6-year bonds. There had been fears that CDS currently referencing the issuing entities of both companies could be orphaned in the future. But MTNLN and SELNSW decided to issue out of their current boxes. It had the same impact on both names. With the prospect of deliverables into the CDS for longer, their 5-year risk premia went wider (roughly +2pts upfront). But at the same time, because short term default does not appear any more likely for any of them, their 1-year / 5-year curves steepened by an equivalent amount.