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More Dispersion To Come?

08 October 2018 by lberuti

The credit market loves an excuse to be quiet and with the US out for Columbus Day, the set-up was perfect for a dozy trading session. It was not the case though, as the weakness that we saw overnight in Asia fed through Autos/Metals and Miners pushing both sectors 3 to 5bps wider on average, while comments from Italian leaders criticising the EU approach towards Italy set the tone for weaker peripheral corporates’ risk premia. Throw into the mix a few idiosyncratic news: MTNLN (Matalan), the value-apparel retailer, posted solid results for the second quarter with 1% revenue growth and relatively flat EBITDA despite warn weather and sporting events dampening customer demand subsequently sending its risk premium 56bps tighter at 1074bps – yes, that is still roughly 17% upfront plus 500bps running -; PPCGA (Public Power Corporation), the Greek utility, announced it had secured “a significant extension” of its debt obligations by signing 2 loan agreements with banks in order to refinance two syndicated bond loans totalling €1.3Bln sending its risk premium 107bps tighter at 282bps; CABBCO (Monitchem HoldCo), the chemical manufacturer, announced a failure of one of the two transformers of its electrolysis plant in Switzerland and sent out a profit warning pushing its risk premium 27bps wider at 406bps; LOUDRE (Louis Dreyfus) announced lower income than analysts were expecting sending its risk premium 47bps wider at 299bps. That definitely made for a busy day, and many took it as a sign there could be more dispersion to come.