Standard Chartered Plc led a decline in European bank bond risk to a 19-month-low as it settles claims it violated U.S. sanctions by dealing with Iranian clients.
Credit-default swaps on Britain’s second-largest bank by market value dropped three basis points to 88 at 11:15 a.m. in London, the lowest since May 2011, data compiled by Bloomberg show. Air France-KLM, Europe’s biggest airline, is selling its first benchmark bonds since 2009.
London-based Standard Chartered said talks with U.S. authorities may conclude by yearend after it was accused in August of helping Iran launder about $250 billion. Credit risk fell as corporate borrowers continued to take advantage of near record-low yields to sell bonds before the traditional holiday season slowdown.
“There’s not much sign of the holiday lull yet and the market is pretty buoyant,” said Elisabeth Afseth, an analyst at Investec Bank Plc in London. “The Iran settlement gets rid of the uncertainty hanging over Standard Chartered.”
Investor appetite for corporate debt has pushed yields on investment-grade bonds down to 2.15 percent on average from 4.4 percent at the start of the year, Bank of America Merrill Lynch’s Euro Corporate Index shows.
Corporate borrowers are raising at least 7.4 billion euros ($9.7 billion) from bond sales this week, compared with 12.1 billion euros for all of last week, according to data compiled by Bloomberg that tracks issuance in euros and pounds by non-financial companies. Sales reached 34.5 billion euros in November, a record for that month.
Air France-KLM is raising 500 million euros from bonds due January 2018 that will be priced to yield 6.375 percent, according to people familiar with the transaction.
Heathrow Finance Plc, a unit of the London airport operator, is meeting investors today on a 250 million-pound ($403 million) of senior secured bonds maturing in September 2019.
Hypo Alpe-Adria-Bank International AG is selling benchmark tier 2 bonds in euros guaranteed by the Austrian government.
GDF Suez SA’s bonds fell more than any other company after Europe’s largest utility by market value said earnings will drop next year because of the weak economy. The Paris-based company’s 2.625 percent bonds due 2022 fell 0.3 percent to 102.8 cents on the euro, the biggest faller in Bank of America Merrill Lynch’s EMU Corporates Non-Financial index.
The Markit iTraxx Crossover Index of contracts on 50 companies with mostly high-yield credit ratings fell one basis point to 477. A decline signals improvement in perceptions of credit quality.
The Markit iTraxx Financial Index of senior debt issued by banks and insurers was 152 basis points after earlier dropping to a 19-month low of 145. The financial subordinated index was little changed at 259.
The Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined one basis points to 118.
Contracts insuring Wendel SA, France’s largest publicly traded investment firm, rose after Chief Executive Officer Frederic Lemoine said today the company will continue to buy back shares if the 36.2 percent discount on the net asset value remains near a historical high.
A basis point on a credit-default swap protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
-- Editors: Andrew Reierson, Michael Shanahan