Compiled by Annie Seelaus
HSBC Bank plc, London
Tel: +44 20 7336 3525
The traditional summer lull has refused to appear this year with secondary volumes remaining unseasonally high. With client cashflows still strong spreads have resumed their tightening trend after the wobbles of the last couple of weeks.
All sectors showed improvement on the week. Triple-As eked out a basis point or so of tightening with KfW in particular continuing its rehabilitation. Financials were 2bp-3bp on the week with renewed interest being seen in tier one and upper tier two issues where decent pickups to lower tier two are starting to re-emerge.
Utilities were around 5bp better on the week buoyed by a strong performance from Northumbrian Water whose operating company bonds closed the week 10bp-15bp better as the regulator announced that he would consider amending the company's licence if reasonable steps were not taken to improve its current ratings.
The company's 2006 bonds which are issued from the holding company and rated sub-investment grade failed to share in the euphoria as the regulators' statement was seen as offering little comfort in respect of ratings at their level.
Safeway bonds were the one poor performer of the week. Having tightened strongly on the expectation that Morrisons or Asda would prevail in the current takeover battle, investors took the opportunity to pare back exposure.
The company's paper closed the week around 10bp wider across the board.