Last week the EUR IG credit index tightened -5.6bp as the market remained buoyed by optimism surrounding a potential US-China trade deal announcement. Issuers also capitalized on the upbeat sentiment to restart issuance activity. In this context, financials outperformed tightening -7.1bp on average, while Industrial and Utilities compressed by -4.5bp and -4.9bp respectively.
Within financials, SP bonds tightened -6.6bp with Greek and Italian regional outperforming (TPEIR 5% ’30 was -23bp WoW and MONTE 6.75%’ 27 was -6bp). SNP bonds tightened -6.6bp on average with Core regions outperforming, including IE at -10.2bp and CH at -9.2bp, and demand spread evenly across tenors. STANLN and BKIR outperformed with news regarding the US-China supporting the first and a retrace of recent underperformance helping the latter despite a new HoldCo issuer on Monday. Tier 2 tightened -9.5bp WoW to 158bp with SOCGEN (-28bp in the long-end) and BPCE (-27bp) supporting FR spreads, while CAJAMA 5.25% shows as the best performer with a remarkable -59bp. Supporting the compression trend, AT1s reported the best performance at -14bp and ERSTBK shows as the best performing despite the 6.375% deal announced earlier in the week.
Main events from last week:
- On Thursday, together with its latest results report disclosure, KBC announced the acquisition of a 98.45% stake in 365.bank in Slovakia, for a total cash consideration of EUR761mn. We see the operation, which is expected to take place by the end of 2025, as largely credit neutral for the KBC Group due to its limited scale. 365.bank’s acquisition will solidify KBC’s presence in Slovakia’s as the country’s third bank, where c.5% of income and assets originate (from 12% net loan market share in Dec-24 to a combined total of 14%).
- On Friday, Moody’s affirmed Nordea’s ratings (Aa3/A3/Baa1 for SP/SNP/T2 debt respectively), the rating agency also maintained its positive outlook on the issuer, initially placed on May last year, preferring to wait for the bank to continue posting further RoTE profit levels above the 16% level (17.6% in 1Q) and only mild deteriorations in its asset quality position amid the economic slowdown and high geopolitical uncertainty (NPL ratio unchanged during the 1Q at 1.04%).
- Over the weekend, Il Corriere della Sera reported that UniCredit SpA has asked Italy’s market regulator Consob to suspend its takeover bid for Banco BPM SpA in order to negotiate with the government over a series of conditions imposed on the deal. With the offer period set to expire on June 23, UniCredit argued that the government's requirements represent a significant new element in the process, potentially justifying a suspension of up to 30 days under Italian law. The Italian government announced in April that the deal could proceed only if UniCredit met stringent conditions including: exiting Russia within nine months, maintaining a specific loan-to-deposit ratio, and preserving domestic investment levels at Banco BPM’s asset manager, Anima Holding SpA.
The week ahead will be light in terms of data from the US with the nitial jobless claims on Thursday. In Europe, we will pay attention to the UK CPI release on Wednesday and to the EU PMIs on Thursday, which will provide an indication of the hit to activity from the announcements on US tariffs in the previous month.