Investment Research
Trade Idea
- Enjoy a spread pick-up – EUR and SEK related switch ideas
August Moberg
Analyst
[email protected]
+46 (0)8 568 805 93
3 April 2017
Gabriel Bergin
Senior Analyst
[email protected]
+46 (0)8 568 806 02
Important disclosures and certifications are contained from page 9
This document is intended for institutional investors and is not subject to all the independence and
disclosure standards applicable to debt research reports prepared for retail investors
Buy NOKIA 2019 USD, trading at wide margin to Nokia 2019 EUR
Published on 23 May 2016
The EUR vs SEK outperformance
- EUR spreads have outperformed SEK spreads recently
EUR vs SEK – from wider to tighter
Top switch ideas
•
•
When calculating spreads for this publication, we have used indicative
mid-prices and converted SEK spreads into ASW vs EUR 6m
•
We find the top five currency related switches, in terms of spread
pick-up, to be the following (SELL vs BUY):
•
TVOYFH 4.6% '19 (EUR) vs TVOYFH 3.9% '18 (SEK)
•
VOVCAB 2.5% '22 (SEK) vs VOVCAB 3.3% '21 (EUR)
•
SANDSS FRN '21 (SEK) vs SANDSS 3.8% '22 (EUR)
•
SWEMAT 3.9% '17 (EUR) vs SWEMAT 4.3% '18 (SEK)
•
MAERSK FRN '19 (EUR) vs MAERSK 3.8% (SEK)
•
•
•
•
Triggered by the ECB’s announcement of its CSPP programme, EUR
corporate spreads have outperformed SEK spreads in the last year
While the EUR ’BBB’ ASW (non-financials) traded some 80bps
wider than its SEK equivalent 13 months ago, it currently trades
tighter than the SEK ’BBB’ ASW spread for non-financials
Following the strong EUR spread development, we see spread
deviations across currencies in the capital structures of several
Nordic corporates
In this publication, we highlight corporate issuers where we see the
greatest spread pick-up from EUR and SEK related switches
When assessing relative value across currencies, we have chosen
to take a buy and hold perspective. Hence we have not considered
any potential spread premium related to liquidity (or lack thereof)
Spread development EUR vs SEK (bps)
Top switch ideas
SELL / BUY
TVOYFH 4.6% '19 (EUR) / TVOYFH 3.9% '18 (SEK)
VOVCAB 2.5% '22 (SEK) / VOVCAB 3.3% '21 (EUR)
SANDSS FRN '21 (SEK) / SANDSS 3.8% '22 (EUR)
SWEMAT 3.9% '17 (EUR) / SWEMAT 4.3% '18 (SEK)
MAERSK FRN '19 (EUR) / MAERSK 3.8% (SEK)
TVOYFH 2.5% '21 (EUR) / TVOYFH 2.8% '20 (SEK)
MYL FRN '18 (EUR) / MYL FRN '18 (SEK)
SCANIA FRN '18 (EUR) / SCANIA 0.4% '19 (SEK)
VLVY FRN '18 (EUR) / VLVY FRN '18 (SEK)
Source: iBoxx, Danske Bank Markets
Source: Bloomberg, Danske Bank Markets
Pick-up (bps)
55
42
41
38
30
27
26
23
22
1
The SEK vs EUR pick-up
- We recommend switching from EUR to SEK in selected names
Electrolux (S&P: ‘A-’/Stable)
•
•
•
Relative Value (EUR)
We suggest switching from ELTLX 1% ’19 (EUR) into
ELTLX ’19s (SEK)
The switch offers a spread pick-up of around 8-10 bps,
despite slightly shorter duration in the SEK leg
Latest credit research: Q4 16: net cash position unlikely to
be here to stay, 3 February 2017
Name
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call
ELTLX 1% '19 (EUR)
ELTLX 2.3% '19 (SEK)
ELTLX FRN '19 (SEK)
EUR
SEK
SEK
18
28
26
102.4
104.5
100.8
100
250
750
05/12/2019
28/05/2019
28/05/2019
Cupon
1%
2.34%
FRN
Fortum (S&P: ‘BBB+’/Stable)
•
•
•
Relative Value (EUR)
We suggest switching from FUMVFH 6% ‘19 (EUR) into
FUMVFH 18s (SEK)
Maturity in the SEK leg is around one year shorter than
the EUR leg and despite this the switch offers a spread
pick-up of some 10-15bps
Latest credit research: Q4 16: Low hydro volumes don’t
affect dividend, 2 February 2017
Name
FUMVFH 6% '19 (EUR)
FUMVFH 2.8% '18 (SEK)
FUMVFH FRN '18 (SEK)
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call
EUR
SEK
SEK
18
33
28
111.7
102.6
100.5
750
1150
3000
20/03/2019
20/03/2018
20/03/2018
Cupon
6%
2.75%
FRN
Source: Bloomberg, Danske Bank Markets
2
The SEK vs EUR pick-up
- We recommend switching from EUR to SEK in selected names
Maersk (S&P: ‘BBB’/Neg.)
•
•
•
Relative Value (EUR)
We suggest switching from either MAERSK 3.4% ’19
(EUR) or FRN ‘19 (EUR) into MAERSK ‘18s in SEK
The switches offer spread pick-ups of around 18-20bps
and 28-30bps, respectively
Latest credit research: Q4 16: Difficult quarter – leverage
flattish q/q, 8 February 2017
Name
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call
MAERSK FRN '19 (EUR)
MAERSK 3.4% '19 (EUR)
MAERSK FRN '18 (SEK)
MAERSK 3.8% '18 (SEK)
EUR
EUR
SEK
SEK
21
31
49
51
102.6
107.6
101.3
103.2
500
750
1100
1400
Cupon
18/03/2019
FRN
28/08/2019 3.375%
26/02/2018
FRN
26/02/2018 3.75%
Swedish Match (S&P: ‘BBB’/Stable)
•
•
•
Relative Value (EUR)
Switch from SWEMAT 3.9% ‘17 (EUR) into the SEK
FRN/3.9% ‘18s or longer SEK 4.3% ‘18, offering a spread
pick-up of 22-24bps and 38bps, respectively
In addition, the SEK 4.3% ’18 offers a spread pick-up of
some 14bps to the longer-dated EUR 3.1% ‘19
Latest credit research: Q4 16: Time to enjoy the SEK pickup, 20 February 2017
Name
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call Cupon
SWEMAT 3.9% '17 (EUR)
EUR
17
102.6
214 24/11/2017 3.875%
SWEMAT 3.1% '19 (EUR)
EUR
41
105.7
100 03/04/2019 3.125%
SWEMAT 3.9% '18 (SEK)
SEK
41
103.1
150 01/02/2018 3.875%
SWEMAT FRN '18 (SEK)
SEK
39
101.2
350 01/02/2018
FRN
SWEMAT 4.3% '18 (SEK)
SEK
55
105.7
750 19/09/2018 4.25%
Source: Bloomberg, Danske Bank Markets
3
The SEK vs EUR pick-up
- We recommend switching from EUR to SEK in selected names
TVO (S&P: ‘BB+’/Stable)
•
•
•
Relative Value (EUR)
We suggest switching from the 4.6% 2019 (EUR) into the
SEK 18s to receive a spread pick-up around 50bps
In addition, shortening maturity from 2.5% 2021 in EUR to
the SEK 2020s equals a spread pick-up of 15-25bps
Latest credit research: Q4: 16: All eyes on France, 28
February 2017
Name
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call
TVOYFH 4.6% '19 (EUR)
TVOYFH 2.5% '21 (EUR)
TVOYFH 3.9% '18 (SEK)
TVOYFH FRN '18 (SEK)
TVOYFH 2.8% '20 (SEK)
TVOYFH FRN '20 (SEK)
EUR
EUR
SEK
SEK
SEK
SEK
50
114
105
96
141
130
107.9
105.1
104.4
100.4
103.7
98.6
500
500
875
1125
550
650
Cupon
04/02/2019 4.625%
17/03/2021
2.5%
13/09/2018 3.875%
13/09/2018
FRN
19/05/2020 2.84%
17/03/2020
FRN
Volvo (S&P: ‘BBB’/Pos.)
•
•
•
Relative Value (EUR)
We suggest switching from Volvo’s 2018s in EUR into the
VLVY 2018s in SEK
The switches offer spread pick-ups around 12-22bps
Latest credit research: Q4 16: Solid debt metrics despite
cash flow one-offs, 2 February 2017
Name
VLVY FRN '18 (EUR)
VLVY FRN '18 (EUR)
VLVY FRN '18 (EUR)
VLVY FRN '18 (EUR)
VLVY FRN '18 (SEK)
VLVY FRN '18 (SEK)
VLVY 0.1% '18 (SEK)
VLVY FRN '18 (SEK)
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call
EUR
EUR
EUR
EUR
SEK
SEK
SEK
SEK
17
18
20
17
39
39
33
36
100.4
100.3
100.2
100.2
100.9
100.4
100.0
100.3
350
575
400
500
1050
2000
1500
2000
Cupon
19/02/2018
FRN
20/06/2018
FRN
03/08/2018
FRN
12/12/2018
FRN
26/02/2018
FRN
09/03/2018
FRN
24/08/2018 0.125%
24/08/2018
FRN
Source: Bloomberg, Danske Bank Markets
4
The SEK vs EUR pick-up
- We recommend switching from EUR to SEK in selected names
Scania (S&P: ’BBB+’/Neg.)
•
•
•
Relative value (EUR)
We suggest switching from SCANIA FRN 2018 in EUR
into SEK bonds with matching maturities
The greatest spread pick-up can be found in the 0.4%
2019 SEK (23 bps), followed by the FRN/0.9% 2018s (18
bps) and the FRN 2019 (14 bps)
Latest credit research: no coverage
Name
SCANIA FRN '18 (EUR)
SCANIA 0.9% '18 (SEK)
SCANIA FRN '18 (SEK)
SCANIA FRN '19 (SEK)
SCANIA 0.4% '19 (SEK)
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call Cupon
EUR
14
100.2
500 24/10/2018
FRN
SEK
32
101.2
650 03/12/2018 0.875%
SEK
32
99.9
1350 03/12/2018
FRN
SEK
28
101.0
2800 05/04/2019
FRN
SEK
37
100.3
450 05/04/2019 0.375%
Source: Bloomberg, Danske Bank Markets
5
The SEK vs EUR pick-up
- The other way around
Volvo Car (S&P: ‘BB’/Pos.)
•
•
•
•
Relative Value (EUR)
In contrast to other issuers mentioned in this report, Volvo
Car’s EUR bond offers a spread pick-up to its SEK bonds
We suggest switching from VOVCAB’s SEK 2022s into
the 2021 in EUR
By shortening the maturity and switching from SEK to
EUR, a spread pick-up of around 35-40bps is offered
Latest credit research: no coverage
Name
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call Cupon
VOVCAB 3.3% '21 (EUR)
VOVCAB 2.5% '22 (SEK)
VOVCAB FRN '22 (SEK)
EUR
SEK
SEK
183
141
148
107.0
101.9
102.6
500
500
2500
18/05/2021 3.25%
07/03/2022 2.5%
07/03/2022
FRN
Sandvik (S&P: ‘BBB’/Pos.)
•
•
•
Relative Value (EUR)
Similar to Volvo Car, a pick-up from switching to EUR from
SEK is possible in Sandvik bonds
By extending the maturity one year and switching from the
FRN 2021 in SEK to the 3.8% 2022 in EUR a spread pickup of around 40bps is possible
Latest credit research: Scandi Capital Goods Sector
Update, 20 February 2017
Name
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call Cupon
SANDSS 3.8% '22 (EUR)
EUR
98
112.9
150 15/02/2022 3.8%
SANDSS FRN '21 (SEK)
SEK
57
101.2
1500 14/01/2021
FRN
Source: Bloomberg, Danske Bank Markets
6
The SEK vs EUR pick-up
- Other currency-related switch ideas
Meda (unrated) / Mylan (S&P: ‘BBB-’/Stable)
•
•
•
•
•
Relative Value (EUR)
Mylan’s acquisition of Swedish Meda was completed in
2016 and in late 2016 it was announced Mylan would
guarantee Meda’s outstanding SEK bonds
We suggest switching from Mylan’s EUR bonds into
Mylan’s “Meda bonds” in SEK
Switching from MYL FRN 2018 in EUR into the SEK
2018s offers a spread pick-up around 26 bps
Switching from MYL 1.3% 2020 (EUR) into the SEK FRN
2019s offers a spread pick-up of around 12 bps
Latest credit research: no coverage
Name
MYL FRN '18 (EUR)
MYL 1.3% '20 (EUR)
MYL FRN '18 (SEK)
MYL FRN '19 (SEK)
Currency ASW (EUR) Price (mid) Outstanding (local ccy) Maturity/call Cupon
EUR
28
100.8
500 22/11/2018
FRN
EUR
59
102.3
750 22/10/2020 1.25%
SEK
54
102.2
600 05/04/2018
FRN
SEK
71
101.6
750 21/05/2019
FRN
Source: Bloomberg, Danske Bank Markets
7
Fixed Income Credit Research team
Thomas Hovard
Head of Credit Research
+45 45 12 85 05
[email protected]
Henrik René Andresen
Credit Portfolios
+45 45 13 33 27
[email protected]
Gabriel Bergin
Strategy, Financials
+46 8 568 80602
[email protected]
Brian Børsting
Industrials
+45 45 12 85 19
[email protected]
Bendik Engebretsen
Industrials
+47 85 40 69 14
[email protected]
Katrine Jensen
Financials
+45 45 12 80 56
[email protected]
Louis Landeman
Industrials, Real Estate
+46 8 568 80524
[email protected]
Jakob Magnussen
Utilities, Energy
+45 45 12 85 03
[email protected]
Jonas Meyer
Shipping
+47 85 40 70 79
[email protected]
August Moberg
Industrials & Construction
+46 8 568 80593
[email protected]
Niklas Ripa
Credit Portfolios
+45 45 12 80 47
[email protected]
Mads Rosendal
Industrials, TMT
+45 45 14 88 79
[email protected]
Haseeb Syed
Industrials
+47 85 40 54 19
[email protected]
Find the latest Credit Research: :
Danske Bank Markets: http://www.danskebank.com/danskemarketsresearch
Bloomberg: DNSK<GO>
8
Disclosures
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ('Danske Bank'). The authors of this research report are
August Moberg, Analyst, and Gabriel Bergin, Analyst
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Report completed: 31 March 2017, 12:11 GMT
Report first disseminated: 3 April 2017, 07:00 GMT
11