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Corporate Bond Market Comment by Raiffeisen Research: OMV, Kapsch TrafficCom, Telekom Austria

Published: October 23, 2014; 17:00 · (Vindobona)

"The slight correction on credit markets that lasted until the middle of last week was calmed by speculations of a possible extension of the US Fed’s expansive monetary policy stance, as well as thus far also unconfirmed reports that the ECB might expand its bond purchases to the corporate bond sector. This slight relaxation was also observable in the stock market volatility, measured by the VDAX. This indicator rose to 23.57% p.a. last week and by yesterday had fallen to 17.75% p.a." Raiffeisen Research is seeing similar market developments in their Austrian Corporate Index.

Corporate Bonds in the Spotlight: OMV, Kapsch TrafficCom, Telekom Austria / Picture: © Flickr

Given the almost barren EUR primary market, the current earnings season and upcoming results from the ECB’s stress test are garnering the most investor attention in Austria and the rest of Europe.

While in the USA already around a third of companies on the S&P 500 have reported figures better than expectations, the earnings season and outlooks for it in Austria are only just now slowly starting to come in.


This Monday OMV reported its Q3 2014 trading statement and although there was a slight rise in production in the Exploration and Production division, the lower oil price has negatively affected results.
The strength of the USD over the EUR was able to partially compensate, though. The market environment with which the Gas & Power division is confronted continues to remain challenging.
Within the Refining & Marketing division the company is profiting from the completed modernization of the refinery in Romania.
OMV’s complete quarterly report will be made available on 6 November.

Kapsch TrafficCom:

Kapsch TrafficCom announced that it was experiencing non-cash effectual write-offs on assets and participations and simultaneously dissolving provisions for losses from pending business and rectification of projects.
Both are accounted for in the H1 2014 report per 30 September 2014 and result in a significant increase in semi-annual EBIT.
The complete quarterly figures will be published on 20 November.

Telekom Austria:

Furthermore, Telekom Austria published its Q3 2014 report today.
The results came in above market expectations and Telekom Austria bonds have been trading largely unchanged this morning.

Given the lack of activity on the primary market and government bond yields that are still extremely low, Raiffeisen Research considers the EUR credit market to still be supported.

Furthermore, worries over European economic development and the USA have thus far only temporarily affected credit markets as long as various market participants are considering further measures taken by central banks to actually be realistic (e.g., extension of QE in the USA, corporate bond purchases from the ECB). At the sametime, volatility on credit markets could continue to rise.

In this kind of environment Raiffeisen Research would expect better quality bonds from both the investment grade and high yield sectors to profit the most.

Copyright Raiffeisen Research

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