Volkswagen, Glencore Troubles Unsettle Bond Investors
30 Setembro 2015 - 1:21PM
Dow Jones News
By Christopher Whittall
September proved one of the worst months for Europe's corporate
bond market in years, as a sharp selloff in bonds of Volkswagen AG
and Glencore PLC reminded investors that even the biggest bluechips
can run into trouble.
The extra yield investors demand to hold European corporate debt
over government bonds has jumped to its widest level since October
2012 as bond investors have switched to assets they perceive as
less risky, according to Markit.
Bonds of both the German auto maker VW and Swiss commodities
trading firm Glencore have taken a particularly bad beating,
accounting for 15% of the jump in corporate bond yields over
government bonds, according to Credit Suisse analysts.
But the difficulties at the two companies have also served as a
broader wake-up call about potential default risks lurking in the
corporate sector, after years of falling corporate bond yields.
"Nobody wants to think in a credit rated as highly as VW that
something could go wrong," said Peter Aspbury, a portfolio manager
at J.P. Morgan Asset Management, which oversees $1.8 trillion in
assets.
VW's and Glencore's woes are "an important reminder that credit
risks do exist" among major corporate borrowers, he said.
Glencore's yields began their surge earlier this month as
investors worried about the impact of falling commodity prices,
triggered by a slowdown in China, and the company's significant
debt-load. The yield on Glencore's five-year euro-denominated debt
rose to as high as 8.4% Wednesday, from under 2% as recently as
August, according to Tradeweb. Yields fall as prices rise. On
average $70 million worth of Glencore bonds have changed hands a
day in September in European secondary debt markets, about twice
the average of the previous two months, according to data from
MarketAxess.
At VW, investors are fretting over the firm's disclosure last
week that as many as 11 million diesel cars contained software that
U.S. authorities say allowed the company to dodge emissions
standards. The yield on VW's five-year euro-denominated debt rose
to as high as 2.9% Wednesday from around 0.9% earlier in September.
European daily trading volumes for VW bonds leapt about tenfold to
$756 million in the days following VW's disclosure, according to
MarketAxess.
The selloff has spilled over into the broader auto sector.
The average yield on bonds belonging to auto companies has risen
to 2.55% from 1.67% on September 18 before VW's disclosure,
according to Markit. The average yield on basic materials companies
has increased to 2.93% from 1.92% at the end of August.
Russell Silberston, a portfolio manager at Investec Asset
Management, said the VW scandal clearly had implications for other
auto makers, particularly if it leads to greater regulation or
fewer customers buying diesel cars. However, he said that such
events don't tend to have a lasting effect on bond markets.
For now, the selloff has cast a pall over the wider market, with
the flow of new bonds slowing. Companies had issued $31 billion of
European investment-grade corporate bonds so far this month as of
Tuesday, compared with $63 billion in September 2014, according to
Dealogic. This month is on track to be the slowest September for
new deals since the height of the sovereign debt crisis in
2011.
"The market feels very volatile and weak," said Edward Farley,
head of European corporate bonds at Pramerica Fixed Income, which
oversees $550 billion in assets.
"There is a stack load of new bond deals waiting in the wings,
but the market is not in a place to deal with it," he added.
Write to Christopher Whittall at
christopher.whittall@wsj.com
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(END) Dow Jones Newswires
September 30, 2015 12:06 ET (16:06 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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