EM LATAM CREDIT: New Issue Mandate: Argentina's IRSA (IRSAAR; NR/NR/B)
“MANDATE: IRSA to Hold FI Investor Calls Wednesday” – BBG
IPTs: N/A
FV: 9% Area
• Argentina large, diversified real estate company IRSA is proposing a senior unsecured USD benchmark-size 10-year bond (9-year weighted average life). The company launched an exchange offer March 10 for USD141mn outstanding 2028 notes paying USD104 if exchanged by March 24 for the new notes.
• IRSA is an infrequent issuer, typically funding locally. Existing 2028 notes were quoted with a 6.9% yield prior to the exchange offer, a similar yield to YPF (YPFDAR; Caa1/B-/CCC) 2027s. YPF 2034s issued at 8.5% yield January 2025 were last quoted 8.44%. Argentina (ARGENT; Caa3/CCC/CCC) 2035 bonds were last quoted USD63.6, 11.8% yield.
• Like YPF, IRSA’s risks are tied to the country with high inflation levels, devaluation risk, capital controls and limited access to international financial markets.
• We assess a higher yield requirement to IRSA given its operations are domestic while YPF as a producer of oil and gas has an internationally demanded commodity as well as more access to USD revenue.
• Fundamentals of IRSA are solid with shopping mall occupancy rates above 97% and office occupancy rates reaching 92.8% as of 3Q24 with debt/EBITDA expected to be 3.5x according to a Fitch Ratings report from May 2024.
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GILTS: 10-year Gilt/Bund Spread Tightens 2.5bps To 204bps
The 10-year Gilt/Bund spread has tightened 2.5bps today to 204bps, with UK yields now 5bps below earlier session highs of 4.525%.
- The prospect of increased European defence spending has placed upward pressure on core FI yields through the day, though UK yields have seen a more pronounced reversal than EGB peers.
- Headlines from EU policymakers have hinted at a possible relaxation of fiscal rules to facilitate extra defence spending, alongside prospects of joint issuance. The UK would of course be unaffected by such decisions.
- UK PM Starmer nonetheless indicated that the UK will need to increase defence spending in earlier comments.
- Gilt futures are -35 ticks at 92.95, looking to close the opening gap lower at 93.10.
BONDS: BTP/Bund spread is testing support
- The Italian BTP helps some of the recovery in EGB futures, the contract look to close the opening gap up to 120.02, while better resistance will be seen at 120.47 initially.
- The 2.50% Yield level in Bund held perfectly so far today, after it printed 2.501% high earlier.
- Despite the US out for a Bank Holiday, Volumes in Europe are quite elevated when we consider that we didn't have any notable data release for the session.
- BTP/Bund spread is now 2.7bps tighter vs ~1.9bp earlier, the spread is making another attempt at that ~106.16bps level, where it found support in December, January and also this Month.
EURIBOR: Mix Of Net Short Setting And Net Long Cover Seen On Friday
OI data points to a mix of net short setting and net long cover in Euribor futures on Friday. Futures settled -0.5 to -3.0 ticks through the blues, partially due to prospects of a less-onerous-than-expected US reciprocal tariff regime (announced late Thursday).
- The largest net pack OI swing was seen in the reds (-14.3k), driven by ~18.5k of net long cover in the H6 contract.
- Meanwhile, there was 20.2k of indicative net long cover seen in the M5 contract.
| 14/02/2025 | 13/02/2025 | Daily OI Change | Daily OI Change In Packs | ||
| ERH5 | 576,160 | 567,935 | +8,225 | Whites | -7,782 |
| ERM5 | 712,236 | 732,470 | -20,234 | Reds | -14,349 |
| ERU5 | 560,303 | 554,445 | +5,858 | Greens | -2,948 |
| ERZ5 | 622,006 | 623,637 | -1,631 | Blues | +3,916 |
| ERH6 | 408,117 | 426,620 | -18,503 | ||
| ERM6 | 342,190 | 340,644 | +1,546 | ||
| ERU6 | 264,633 | 266,324 | -1,691 | ||
| ERZ6 | 330,859 | 326,560 | +4,299 | ||
| ERH7 | 168,388 | 169,662 | -1,274 | ||
| ERM7 | 133,844 | 132,031 | +1,813 | ||
| ERU7 | 95,832 | 95,731 | +101 | ||
| ERZ7 | 117,781 | 121,369 | -3,588 | ||
| ERH8 | 59,824 | 59,421 | +403 | ||
| ERM8 | 46,633 | 45,587 | +1,046 | ||
| ERU8 | 33,805 | 32,037 | +1,768 | ||
| ERZ8 | 46,132 | 45,433 | +699 |
