Here’s What to Watch in European High-Yield Bonds This Week

(Bloomberg) -- Investors in Europe’s high-yield market might be forgiven for experiencing a ‘homely feel’ to primary activity this week following a debut transaction from U.K. carpet maker Victoria Plc and an unrated deal from Norwegian furniture manufacturer Ekornes QM Holding AS. Elsewhere, International Design Group is said to be preparing a floating rate note for syndication this week or next.

Syndicate bankers say they are readying a few transactions for the first part of November. And while the pipeline for new deals might pick up next month it’s expected to fall short of the pace seen in September, when 8.4 billion euros ($9.6 billion) equivalent of high-yield deals priced in Europe.

Earnings will continue to provide a focus for the secondary market this week. Drugmakers Stada Arzneimittel AG and Recordati SpA, which sold its 1.3 billion-euro bond backing CVC Capital Partners’ investment on Oct. 12, are among those reporting. SMCP Group SAS, Fiat Chrysler Automobiles and Air France-KLM are also releasing results in the coming days, while Tendam Brands SAU (formerly Cortefiel) reported earnings for the first half of its 2018/2019 financial year this morning.

Another issuer to watch is CMA CGM SA, which is expected to hold a call with bondholders today to discuss the acquisition financing for Ceva Logistics AG.

Macro influences this week will include Italy and the U.K. British Chancellor Philip Hammond will deliver his annual tax and spending plans this afternoon, the last before the Brexit deadline in March, and days before the Bank of England’s policy decision on Thursday. In Italy, S&P Global Ratings decided Friday to lower its outlook on the country’s debt to negative, while keeping its rating unchanged at two notches above junk.

Outflows Maintained

High-yield funds with a European focus saw outflows of $286 million in the week to Oct. 24 compared with $287 million outflows the previous week, analysts at Bank of America Merrill Lynch wrote in a client note on Friday, citing EPFR Global data.

  • Global high-yield funds and U.S. focused funds recorded outflows of $366 million and $144 million, respectively, the BofAML analysts said
  • High-yield funds denominated in euro saw an acceleration of outflows, at $347 million, versus $155 million of redemptions the previous week, Wells Fargo analysts wrote in a client note, citing EPFR Global data for week to Oct. 24
  • In the U.S., corporate high-yield funds seesawed back to outflows of $2.36 billion for the week ended Oct. 24, according to Lipper Fund Flows data