The European Union announced plans for a long-term bond for Ireland Friday, while credit markets enjoyed a quiet day. Only one other deal was in the primary market, and credit default swap indexes were almost unchanged from the day's open.
The European Union is planning a benchmark-size, euro-denominated, 20-year bond, one of the banks running the deal said Friday.
The proceeds from the issue will be used under the European Financial Stabilization Mechanism to help fund the EU and International Monetary Fund aid package for Ireland.
Citigroup Inc., Deutsche Bank AG, DZ Bank, Royal Bank of Scotland Group PLC and UBS AG are the joint bookrunners on the new bond, which is expected to be issued in the coming weeks, subject to market conditions.
The European Union is rated triple-A by all three of the major ratings companies and is backed by the EU budget and the 27 EU member states.
The other bond in the market will be Circle Anglia Social Housing PLC, a U.K. provider of affordable housing. It will price a GBP250 million, 32-year, senior secured bond at 198 basis points over the reference gilt, at the tight end of an already revised guidance.
The issuer is rated Aa3 by Moody's Investors Service Inc.
Meanwhile, credit default swap indexes opened tighter the day amongst a dearth of news and stayed around the same levels for the day. The second European Central bank LTRO operation is scheduled to be executed on February 29, and there was little trading ahead of this date.
The Italian Treasury smoothly sold the maximum targeted EUR3 billion of zero-coupon bonds, or CTZ, paying lower yields than a month ago.
The Greek Cabinet approved the fine print of the final debt restructuring offer to its private creditors. Parliament approved the restructuring Thursday night.
At around 1125 GMT, the SovX Western Europe index, which investors can use to buy or sell credit default swaps on a basket of 15 sovereign borrowers, was three basis points tighter at 342/348 basis points, unmoved from the morning, according to data-provider Markit.
Credit default swaps are derivatives that function like a default insurance contract for debt. If a borrower defaults, sellers compensate buyers.
Corporate indexes were also practically unchanged: the iTraxx Europe index, which comprises 125 high-grade borrowers, 25 of which are banks and insurers, was two basis point tighter at 130/131 basis points. The Crossover index of 40 mostly sub-investment-grade European corporate borrowers was eight basis points tighter at 572/575 basis points.
-By Serena Ruffoni, Dow Jones Newswires, +44 (0) 207 842 9349;
serena.ruffoni@dowjones.com
(Ben Edwards in London contributed to this report.)
