What to Watch in European Credit Markets This Week

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

Windows opening, closing?

The market for new bonds is set to creak open for at least a week or two ahead of the traditional Christmas shut-down, despite last week’s sudden widening in spreads. Companies still have funding needs, and may not wish to wait until the New Year, when different, and potentially difficult, market conditions may prevail. And if sentiment has improved, there’s a risk of being crowded out. Already this morning four issuers -- Carrefour SA, Raiffeisen Bank International AG, OMV AG and ABN Amro Bank NV -- have decided today’s the day to do a deal.

Long shadows

It’s a new week but investors can’t forget recent events. The market might seem a little more stable as we start the week but a defensive mindset may now be settling in, pushing back risky transactions and weighing on the price of sub-investment-grade debt. In the investment-grade primary market, investors will be watching to see if U.S. medical equipment-maker Stryker Corp brings its multi-tranche deal.

More events

Markets might be on the up today but there’s plenty that might derail matters. Theresa May and European Union leaders have agreed the text on the Brexit withdrawal agreement, but that conversation is a long way from over. And despite a glimmer of hope that sent BTPs to their lowest in almost two months, Italian budget negotiations continue. Meanwhile, escalating tensions between Russia and Ukraine are hard to ignore. Then there’s the G20 summit, kicking off at the end of the week.

Banks settle down

Things are looking calmer for Europe’s banks Monday after last week’s bloodbath hit lenders, which saw British finance names leading the falls. The cost of insuring against default has dropped almost 6 percent today, with the iTraxx index of credit default swaps for senior financial debt falling to its lowest in 10 days as markets settled.

Speaking of banks, Eurobank Ergasias SA shares jumped on the open after it announced plans to merge with Grivalia Properties REIC. One analyst described the plan, which includes a 7 billion-euro ($8 billion) securitization, as a “stealth recap” which will result in “faster balance sheet healing” and could help it avoid a state intervention.

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