PSA Peugeot Citroen led a drop in high-yield corporate bond risk in Europe to the lowest in six years after Iran agreed to limit its nuclear program in exchange for an easing of international trade sanctions.
The cost of insuring the debt of Europe’s second-biggest carmaker against losses dropped 23 basis points to 375 basis points at 11:41 a.m. in London. The Markit iTraxx Crossover index of credit-default swaps on 50 junk-rated European companies fell 5.4 basis points to 323 basis points, the lowest since October 2007.
Peugeot and Renault SA are expected to be among the biggest beneficiaries of a six-month deal between Iran and six world powers including the U.S., which eases restrictions on Iran’s auto sector, oil exports and other assets. The French carmakers sold more cars in the country than any other European competitor before its nuclear activities forced them to halt exports.
“Risk sentiment has received a shot in the arm from an interim agreement with Iran reached in Geneva yesterday,” Richard McGuire and Lyn Graham-Taylor, fixed-income strategists at Rabobank International in London, wrote in a note to clients. “The Iranian agreement does perhaps offer something for everyone, in that the rise in equities and drop in oil prices indicates the market’s optimistic take on this development.”
Contracts on Peugeot’s debt also fell on reports the company is seeking to hire Carlos Tavares as its chief executive officer. The Paris-based carmaker is said to be in talks to hire Renault SA’s former chief operating officer to replace CEO Philippe Varin, who is due to step down next year, according to two people familiar with the matter. Pierre-Olivier Salmon, a Peugeot spokesman, declined to comment on the hiring.
Speculation that Tavares will become Peugeot’s CEO, along with the Iran accord, is driving the company’s credit-default swaps lower today, said Pierre Bergeron, a credit analyst at Societe Generale SA in Paris.
In the new issue market, Italian aerospace and defense company Finmeccanica SpA hired banks to arrange a possible bond sale, according to a person familiar with the matter. The Rome-based company is rated BB+ by Standard & Poor’s, one level below investment grade.
The average yield investors demand to hold speculative-grade notes in euros fell 12 basis points this month to a record 4.99 percent, Bank of America Merrill Lynch index data show.
Bharti Airtel Ltd., India’s largest mobile-phone operator, will begin meeting investors in Europe on Nov. 27 for a planned debut sale of euro-denominated senior notes, according to another person. The New Delhi-based company is rated Baa3 at Moody’s Investors Service and one level lower at BB+ by S&P.
Prologis Inc., a San Francisco-based industrial real estate developer, is marketing bonds in euros due January 2022 partly to refinance its outstanding 5.875 percent notes maturing October 2014, according to a person familiar with the matter.
Telekom Austria AG, one of the two European network operators part-owned by Carlos Slim’s America Movil SAB, is speaking with investors today about a potential sale of bonds in euros, according to a person familiar with the plan. The Vienna-based company will sell the securities through its Telekom Finanzmanagement GmbH unit.