Last week, the EUR IG credit index was broadly stable, in line with the previous week with the market very much in a waiting and see mode for developments in the Middle East. In this context, Financials only modestly outperformed at -1bp WoW at 101bp, while Industrials and Utilities were unchanged.
Within financials, SP bonds were -1.2bp with the periphery outperforming and investors reaching out to regional names which still offer some pick-up. SNP were -2.3bp on average to 94bp with a balanced performance across the sector and BNP long-end outperforming at c.-6.5bp WoW. Tier 2 bonds broadly flat at 147bp with Greek names weighting at +6bp (ALPHA 6% ’34 was +13bp, EUROB 4.25% ’35 was +8.3bp). Finally, AT1s were +3.9bp on average to 352bp and weakness focused on core names (RBIAV 6% was +17.5%) and lower resets (including SANTAN 3.675% at +10bp).
Main events from last week:
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- French banks are facing a potential €5 billion tax bill over the use of dividend arbitrage strategies (so called cum‑cum transactions) following revelations by Senator Jean‑François Husson on Thursday. These strategies involve temporarily transferring shares to tax-exempt entities around dividend dates, which recalls tax avoidance practices. As part of the 2025 Finance Act, France introduced sweeping reforms to curb such practices by removing timing loopholes, expanding the definition of taxable transactions, and codifying the concept of beneficial ownership to ensure only genuine recipients benefit from tax exemptions.
- On Thursday, UniCredit announced it had received approval from the European Competition Authority for its acquisition of Banco BPM. The approval came with the condition that the number of branches be reduced by 209, primarily in the Veneto region where the combined group would hold an approx. market share of 28%.
- On Friday, Moody’s revised both ING Bank (Opco issuer) and ING Groep’s (Holdco issuer) senior unsecured bond outlooks from positive back to neutral on the back of a downwards revision in net issuance volumes of instruments that would support their loss-given-failure levels. As such current ratings for its outstanding debt are: A1 (stab) – Opco/ Baa1 (stab) – Holdco/ Baa2 (stab) – T2 / Ba1 (stab) – AT1.
In addition to heightened geopolitical uncertainty, the week ahead will be quieter week-on-week in terms of data releases. In the U.S., initial jobless claims are due on Thursday, while in Europe, key releases include Eurozone and UK PMIs today, and HICP figures for France and Spain on Friday.