Junk-rated corporate bonds slumped for a fourth day in Europe, paring the longest rally in eight months as investors await more clarity on the Federal Reserve’s timing for tapering stimulus.
Bonds from companies including New World Resources Plc and Italcementi SpA lost an average 0.45 cents on the euro since Aug. 14 to reach 143.96 cents yesterday, according to Bloomberg bond index data. That’s after they increased 1.8 cents during a near three-week rising streak, the longest stretch of gains since December, the data show.
The Federal Open Market Committee publishes today the minutes of its last meeting, which are expected to show the Fed plans to start reducing bond purchases in September, according to a Bloomberg News survey. European high-yield bonds are also declining as emerging-market equities fell to a six-week low on concern a withdrawal of stimulus will worsen economies from Indonesia to India.
“The realization of tapering in the U.S. combined with renewed fears about the state of emerging economies has compounded to put pressure on European corporate credit,” said Anthony Robertson, who manages $10 billion of assets at BlueBay Asset Management in London.
The cost of insuring junk-rated corporate bonds against losses rose, with the Markit iTraxx Crossover index of credit-default swaps on 50 speculative-grade companies in Europe rising 5.9 basis points to 428 basis points at 1:59 p.m. in London, the highest level since July 12.
European banks are leading issuance in the investment-grade corporate bond markets today. Deutsche Pfandbriefbank AG sold 500 million euros ($670 million) of five-year covered bonds priced to yield nine basis points more than the mid-swap rate, while Helsinki-based Pohjola Bank Plc is marketing 750 million euros of notes to yield 46 basis points more than swaps, according to people familiar with the deals.
ING Groep NV, the biggest Dutch financial-services company, sold 1 billion euros of floating rate notes due February 2015 to yield 48 basis points more than the three-month euro interbank offered rate, according to data compiled by Bloomberg. Credit Agricole SA, France’s third-largest bank, is selling 1.75 billion euros of two-year floating rate notes at a spread of 41 basis points more than three-month Euribor.
Spanish natural gas company, Madrilena Red de Gas, has hired banks to arrange investor meetings starting Aug. 27 for a possible bond sale in euros, a person with knowledge of the matter said. The notes may be rated BBB- by Standard & Poor’s, according to the person, who asked not to be identified because the terms aren’t set. It would be the Pozuelo de Alarcon-based company’s first bond sale, data compiled by Bloomberg show.