Five Things to Watch for in European Credit Markets This Week

(Bloomberg) -- Good morning. Here’s what we will be watching this week:

1. Headwinds in Primary

The majority of syndicate bankers who took part in Bloomberg’s weekly survey believe issuance will remain below 20 billion euros ($23 billion) this week as geopolitical uncertainty combines with quarterly financial reporting blackouts. And that’s not all: news from Italy, headlines around Brexit and the US-China trade war may deter issuers. But as Tesco Plc’s mandate this morning reminds us, primary is still likely to throw up surprises.

2. Italy Budget

Among the many uncertainties in the world, it’s Italy’s budget that’s likely to be grabbing most attention this week and giving direction to credit. Tonight’s deadline for euro area states to submit draft budgets to Brussels means Italian credit, notably the banks, face more turbulence this week. On Friday European Commission President Jean-Claude Juncker said Italy had "not kept its word" on deficit targets.

3. Primary goes green

Green bonds made up almost a quarter of primary market issuance by volume last week, with Ireland and Berlin Hyp AG among issuers piling in to a sector that’s become something of a safe play in a choppy market. This week we’re watching for Royal Schiphol Group NV, Commerzbank AG and ProCredit Holding AG & Co KGaA to all bring their own green bonds.

4. Bank results

Bank of America Corp, Morgan Stanley and Goldman Sachs Group Inc will all report their third-quarter results in the coming days. JPMorgan Chase & Co, Wells Fargo & Co and Citigroup Inc reported on Friday: Citi’s results showed fixed-income trading had helped it post a surprise 9 percent rise in revenue as clients took advantage of the Fed rate hike in September. Fed minutes are also due Wednesday.

5. High Yield Open

Amid all the risk-off headlines, U.S. propane distributor UGI Corp.’s planning a 300 million-euro high-yield deal. This follows the 1.3 billion-euro deal from Fimei’s Recordati, pushed through at the end of last week, and suggests there is still appetite for high-yield deals. That said, one deal does not alone make risk-on sentiment: so others to watch for include the potential offering from Sacyr SA, roadshowed earlier this month, and the Restricted Tier 1 deal from Aegon NV, where investor meetings began Oct. 11.

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