Compiled by Chris Milsom,
HSBC Bank plc, London
Tel: +44 20 7991 5826
Spreads in the Eurosterling market drifted wider this week partly reversing last week's squeeze tighter.
HBOS issued a new preference share that was increased and priced towards the tight end of the guidance at Gilts+162bp. The £750m of new supply dragged spreads in subordinated financials wider with many investors switching into the new deal.
The retail and consumer sector was also in focus this week as Kingfisher, owner of the B&Q DIY chain, reported a drop of 6% in same store sales in Q1 2004. The KINGFI 5.625 2014s widened by 7bp on the week and are trading at Gilts+122bp.
Allied Domecq was in the news too, as Constellation Brands announced it is leading a consortium that is considering whether to launch a takeover bid to rival the £7.5bn cash and share offer tabled by Pernod and Fortune Brands.
The prospect of a more leveraged entity controlling Allied Domecq caused the bonds to wider 10bp with the ALYON 6.625 14 closing at Gilts+210bp yesterday (Thursday).
The market still feels nervous and will be looking closely at the Volkswagen results, among others, due for release on April 29.
Another negative story in the auto sector could well precipitate further spread widening across the market in general.