Societe Generale SA (GLE)’s bonds are providing the best returns among investment-grade corporate securities in euros this month after it said second-quarter profit beat analysts’ estimates.
The 4 percent subordinated notes maturing in June 2023 from France’s second-largest bank have handed investors 2.8 percent so far this month, while investment-grade notes in euros returned an average 0.13 percent, Bloomberg index data show. The lender’s profit more than doubled in the second quarter, aided by an increase in corporate and investment-banking revenue, the bank reported on Aug. 1.
Notes from Credit Agricole SA (ACA) and BPCE SA are also among the best-performing in the region after both French banks reported profit increases yesterday. The cost of insuring European financial corporate debt against losses fell to the lowest in more than two months on Aug. 5, while swaps on France dropped 15 basis points in July, the biggest monthly decline since October.
“Bank bonds got beaten up more than corporates in the sell-off in May and June but now better market sentiment, good economic data and favourable earnings are boosting performance,” said Roger Francis, a credit analyst at Mizuho International Plc in London. “French sovereign risk improved in July and the banks are very correlated with that.”
The worst-returning notes this month are Telecom Italia SpA (TIT)’s 5.25 percent securities due March 2055 that lost 3.9 percent, according to the index. Fitch Ratings cut Italy’s largest phone company’s credit ranking to BBB- on Aug. 5, leaving it ranked one step above junk by the three major rating companies.
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