Time to load up on OATs and EFSF

Secondary spreads in the EFSF’s bond issues have taken a beating recently. French spreads have also made their way out to around 1% over Germany. But if you can handle short term scares, this might be the time to take down French and EFSF paper.

  • 18 Oct 2011
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The EFSF’s spreads have drifted out because of such uncertainty over its funding remit and its responsibilities. Investors do not know what they are buying into for as long as the entity remains political Play-Doh.

Nonetheless, its bonds are backed — and over-collateralised — by Europe’s best sovereign credits with the largest guarantor being Germany whose bonds will cost you around 124bp in yield versus the EFSF in the five year sector and 108bp in the 10 year sector. It is hard to see how anybody holding blocks of German paper can be beating their financing costs enough to make any money.

France’s five year bonds trade 91bp or so over Germany in the five year sector and around 104bp in the 10 year sector. France is not immune from the debt crisis by any means but the difference between French and German yields is mostly because of the flight to quality to the Bund that has taken place as investors panic.

France is not cheap but if you do not like the uncertainty of the EFSF, it offers spread over Germany plus a degree of certainty (with certainty being admittedly, a relative concept at best these days).

This trade can go one of two ways. Europe can get a grip of its sovereign finances and banking sector problems, the EFSF’s job and funding task will become more clearly defined and, all things being equal, those spreads will come back in.

The EU has to opt for this because the alternative would be the continued escalation of the debt crisis to the point of a complete lack of confidence in its governance, value and credit.

That is the downside and at that point you could own whatever European paper you liked, you would still lose your shirt, your house and possibly your mind. In such an event, Europe failing to heal itself is so catastrophic that a dodgy position in the EFSF and France will be the least of anyone’s worries.

  • 18 Oct 2011

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 24 Oct 2016
1 JPMorgan 317,793.98 1355 8.72%
2 Citi 301,114.13 1092 8.26%
3 Barclays 259,580.63 846 7.12%
4 Bank of America Merrill Lynch 258,842.43 934 7.10%
5 HSBC 224,273.23 905 6.15%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Oct 2016
1 JPMorgan 32,854.00 58 6.73%
2 BNP Paribas 31,678.29 142 6.49%
3 UniCredit 31,604.22 138 6.47%
4 HSBC 25,798.87 114 5.29%
5 ING 21,769.65 121 4.46%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Oct 2016
1 JPMorgan 14,633.71 80 10.23%
2 Goldman Sachs 11,731.14 63 8.20%
3 Morgan Stanley 9,435.23 48 6.60%
4 Bank of America Merrill Lynch 9,229.95 42 6.45%
5 UBS 8,781.68 42 6.14%