Guarantor: DaimlerChrysler AG
Maturity: March 29, 2004
Issue price: 100.135
Fixed re-offer price: 99.21
Launched: Tuesday February 26
Lead mgr: Caboto IntesaBci
We got one lead order from an institutional account for a two year deal. We saw no corporate paper out there carrying a good coupon. Despite the recent trouble in the automotive sector, we still went for DaimlerChrysler as it has a well recognised name and generates the right spread.
About 20% was placed with institutions, the vast majority with retail, of which 20% went via intermediaries. The syndicate distributed about 30%.
Geographically, the split was 60% to Germany, Austria and Luxembourg collectively, 30% to Italy, and the rest to Switzerland, France and others.
"...this is a relationship type deal - there is always big business somewhere in the pipeline for the big issuers like Daimler.
Generally we are still long this kind of paper from stuff we accumulated on the secondary market late last year, but we like to come into a new deal at a subsidiary level once in a while to have our name seen. This one came at about 60bp over swaps, which looks fairly expensive to where their euro debt is trading, but you can sell it on to the usual German accounts."
CEE market report
Compiled by Holger Kron,
Deutsche Bank, Frankfurt
Tel: +49 69 9103 4468
Czech korunas: The main focus this week was on the strength of the koruna itself. Continued fears of central bank intervention, with verbal or physical actions possible at any time, kept the market on the sideline for the time being.
Some international players even expected another rate cut at yesterday's (Thursday's) Czech National Bank (CNB) meeting to ease appreciation pressure. But the CNB kept all interest rates unchanged, which was no surprise to the domestic market at all.
For the time being the bond market is trading alongside Bunds, which struggle to find a distinct direction. Today (Friday) the market will focus on the launch of the government auction calendar for the second quarter, maybe with more directional information.
Hungarian forints: Everything proves we are within the pre-election period already, as price action becomes more and more political. Inflation and currency related comments pushed currency and bond markets in both directions, eventually to the downside.
The Socialists envisage inflation higher than 5%, which means that their victory would cast serious doubts over any cuts within the near future (the National Bank of Hungary's target is 3.5%). On this prospect, yields rose while the currency lost strength, trading at a support level of Huf246.50/Eu.
Fears that foreigners could decrease exposure further before the election triggered domestic selling, leaving the market occasionally with no bids. Eurobonds followed the downtrend, so that the DePfa 6.5% 2012 launched last week traded down to the 94.50 level at one point.
The focus today will be on the GDP release, expected at 3.5% after 3.7% previously. Next week supply from the government bond auctions of Huf30bn of the G05 and Huf15bn of the A17 could push yields higher again.
Polish zlotys: This week began with pressure on both bonds and the currency. Uncertainty resulting from speculation that the government might convert pension fund arrears into tradable bonds added to the negative bias, as it would mean an increase in supply of roughly Z2bn.
Participants then hoped for a successful launch of the sovereign's Eu750m 10 year Eurobond, as this would ease the upcoming domestic supply. But in the end the deal's launch did not matter, and the market's focus moved to Wednesday's monetary policy committee meeting, which ended without any announcements. This disappointed only a few politicians, as market participants had not expected any rate moves.
Yesterday's current account deficit was another negative, as the $826m figure greatly exceeded expectations of $650m, with the deficit mainly bruised by weak export data. Surprisingly, the market's reaction was only moderately negative, which could imply increasing market stability.
The zloty is an expensive short, and in times when volatility decreases it begins to look a more compelling straight carry trade opportunity again. With prospects of upcoming cuts, long positions will look attractive soon.