CORP UPDATE-Sell-off accelerates, high-yield bears brunt
By Natalie Harrison LONDON, August 5 (IFR) - The European credit markets businesses were seized by panic selling on Friday that the week-long sell-off accelerated on fears that Spain and Italy will need a bailout if the continent's leaders to take dramatic measures to stop the spread of the crisis. Indices of credit derivatives took the lead on global stock markets, which plummeted overnight and continued in Asia and Europe. The iTraxx Crossover index, made up primarily of 50 "junk" credit rating, topped 550bp for the first time since June 2010 and was 43bp wider on the day.The move to 125-name investment grade iTraxx Main was less aggressive, expanding 5BP birth to 136bp. The liquidity has virtually paralyzed, with just a few offers to flash on the screens and sellers take advantage of any opportunity to sell. "It is now starting to feel like panic selling," said a senior high yield trader. "If there is an application showing, then you are likely to make a transaction." All the high-yield bonds through the board declined from three to five points, the trader said, with bid bonds to 97/98 yesterday now down to 94 points, the trader.High yield investors said the sell-off in Crossover largely reflected the decline in the share of investors withdraw from risky assets. The FTSE 100 has long been in need of a correction, he added, but said the euro zone leaders must act quickly to put a floor under falling. "I think the world has awakened to the fact the euro area is in a shambles," said the investor. "Germany can not keep everybody and refinancing, if you look at the debt public in Spain and Italy are negotiating, they are to speculative levels. It's easier for the United Statesto make quick decisions, but in Europe, you have all these different countries who need to agree. "Spanish and Italian public debt of 10 years is trading at around 380bp of German debt, according Tradeweb. MIXED NEWS Net earnings news was mixed, but more stable high-yield credits such as cable companies and Unity Media UPC, which reported strong results, were not immune to volatility. UPC 6.375% 2020 bonds were bid at 91, according Tradeweb. in investment grade bonds in French utility Veolia fell around 1.Five points and five-year credit default swap was 38bp wider at 180bp, its highest since April 2009, according to Markit, a day after the company reported a loss in the first half. The paper industry in Europe has seen a number of high-yield corporate, including M-Real, Sappi, and Norske Skog release of weaker than expected results as high input costs continue to squeeze margins. Norske Skog five-year CDS was the worst performing index Crossover this week, the expansion of 160bp to 1333 bp (see table below).Norske Skog, who was forced to halve the size of a planned bond issue earlier this year on weak demand for the program, saw its 2017 obligations fall nine points, while the obligations of Sappi Tempered 1 to 1.5 points, according Barclays Capital. The heaviest faller of the week was French shipping group CMA, which has been battered by fears about its liquidity position, which fell to USD675m from USD1.8bn at the time of bond issue in April. AMC EUR325m 8.875% 2019 bond application is now just 55 years, according to TradeWeb, compared to 73 at the beginning of the week.The company declined to comment on the reason for the decline in its liquidity position earlier this week. However, Barclays said that the link leads EUR395m - which was led by BNP Paribas with Citi, Deutsche Bank, Natixis and Societe Generale - attributed the decline to new investments, debt repayments and adjustment of restricted cash. The big concern is that the loss of high yield could encourage takeovers, which in turn could jeopardize the ability of high-yield market to absorb about EUR180bn of leveraged loans coming due before 2015, according to data from Moody.The biggest faller in the pan-European index Barclays HY, as measured by the Company% Total Return YTD YTD August 27 August 3 Weekly Total Return -13.87 -4.82 -9.05 -9.31 PagesJaunes -10 42 -19.73 -15.97 Gala Hapag-Lloyd -2.23 -13.74 CMA - 37.82 -16.57 -21.25 worst performers in Europe iTraxx Crossover index, Barclays do do change weekly broadcast July 27 August 3 NXP 514417 97782676106 TUI Alcatel-Lucent 1000 581 468 113 876 124 Norske Skog ONO Finance 1333 160 1173 TECHNICAL SUPPORT FOR INVESTMENT CLASS In investment grade, analysts at Barclays Capital Credit said there were pockets of new value for investors with long-term average spread for investment grade corporate over government bonds at levels last seen in June to 230bp .Halfway into the stream of updates earnings, the mix of "beats" and "rate" is quite balanced, the investment bank said, with consumer-based sectors is not surprising that among the smaller artists and some technology-related companies. "In these circumstances, small improvements in data and / or securities could precipitate a tightening short-term correction," Barclays analyst Neil Seyffert and Zoso Davies.Technical factors may also help to support investment grade spreads, especially as more companies have increasingly used the private placement market and the dollar to finance over the past two months. The negative net issuance of unsecured bonds during this period, combined with a lull in August issue, should provide technical support, Barclays said.
