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The market seems to be taking a while to get into the swing of things as the week started off with Labor Day in the US, which followed the previous week's UK bank holiday. The imminent arrival of September 11 also gave the market further reasons to keep activity low, particularly with the FTSE following the US markets down and falling below the 4,000 level.
Eurosterling has maintained a buoyant cash inflow, however, which has kept spreads well underpinned. Triple-As are the safe haven and liquid area where investors tend to park their cash, and this has led to a couple of triple-A taps - the £100m EIB 7.625% 2006s and £150m EIB 5.5% 2011s. The EIB 5.5% 2011s have firmed 4bp on the week to Gilts plus 23bp and the EIB 6% 2028s are 2bp tighter at Gilts plus 35bp.
Within the financial sector, upper tier two debt came under slight pressure on the back of investor concerns over forthcoming supply. Abbey National and HBOS are two of the names said to be looking at this market for potential issuance. Upper tier two bonds were between 8bp-10bp softer, with the Abbey National 7.5% 2015-perp (Aa3/A) and the Barclays 6.875% 2015-perp (Aa2/A+) now trading at Gilts plus 137bp and Gilts plus 105bp respectively.
Newsflow continued on France Télécom, with the French press reporting that the French government, the company's biggest shareholder with 55.5%, is "seriously considering" a Eu10bn sale of new shares and would take "adequate measures of support" if the company faces financing problems. The bonds initially rallied on the news, but gave a little of the gains back as investors began to contemplate the amount of refinancing that FT needs to do next year their Eu70bn debt pile. The FT 7.5% 2011s (Baa3/BBB-) started the week at Gilts plus 465bp, then traded into Gilts plus 425bp bid, but closed Thursday at Gilts plus 425bp on a mid-point basis.
