Musings from the trading floor (Short Edition)
Names in play this week: £ESP, £FGEN, £IAG
9th May 2025
Musings from the trading floor (Short Edition)
Names in play this week: £ESP, £FGEN, £IAG
Equities: UKX +0.68%, Eurostoxx +0.46%, ASX: -0.08%, SPX: -0.47%
Credit: IG, 6bps tighter, XO 27bps tighter
Interest Rates: 1Yr 13bps higher , 10Yr 10bps higher
Geo-Macro Mania
US: US/UK Trade Deal. You know what they say, if you don’t have anything good to say, don’t say anything. I did however find it amusing that the US Administration announced IAG: LN’s aircraft order for them..
UK: Ah the textbook bond pricing theory went (sort of) out of the window this week with rates being cut yet yields ticking higher. Of course, the old hands and rates traders will know this was more a story about expectations; the mix BOE voting; narrative supporting the cut; and expectations over the June cut being dialled right back.
More Dorm and Gloom (PBSA)
Last week’s musings on the sector were picked up by several sell-side analysts, all echoing the same line: ‘US tariffs driving US students to the UK’. That said, it was another tough news week for the sector. First came the Office for Students (OfS) report on the financial sustainability of higher education providers in England - one segment stood out: “The financial health of English universities is weakening, with nearly half (45.2%) now forecasting a deficit for 2024-25, up from 29.6% in the previous forecast. This deterioration is being compounded by falling student numbers—particularly international entrants, now projected to be 21% lower than previously expected, creating a significant income shortfall across the sector and exposing financial fragilities.”
Next came a political curveball from Scottish Parliament, which voted to include student tenancies, both PBSA and university-owned halls, within new rent control legislation. This is a major regulatory shift. While aimed at fairness for student renters, the move risks stalling investment in an already stretched sector, with some operators warning of reduced development and supply constraints ahead.
And to round it out, QuadReal Property Group is reportedly set to acquire Apollo’s UK PBSA portfolio for a mooted £560 million, implying a c.5.6% NIY across 4,200 beds in eight prime cities (c.£133k per bed). It begs the question: could we now see ESP:LN in play? Several brokers have been looking for sizeable blocks of stock, volume has significantly increased, and the stock is up 14.14% from its post–Liberation Day lows. But the bigger question, how much juice is left in the name?
Axolo Group AS / Nordic HY Bond
My colleague flagged that the brokers were back marketing a tap for Axolo Group AS, as it is looking to raise a further €235m @ E+1050bps, and to quote the brokers email “Axolo Group AS is a Norwegian company founded by the management of Eyvi AS and Hima Seafood AS to create a leading aquaculture group to acquire and develop both these companies.” Now I’m guessing most of the UK IC sell-side doesn’t cover the Nordic market, hence why its relevance when covered last time wasn’t picked up, but this time the issuer is being pretty explicit in their intention to acquire the holding! Whether this leads to an offer is another matter, as they clearly need to raise additional fire power for the acquisition, but it seems like there is some positive momentum here! And by coincidence we did have a good chat with the Chair of FGEN this week (unrelated and prior to the above news) – covered in the fund comms.
My mother arrives this weekend. My wife is traveling on biz, and clearly thinks I need all the Granny’s and Nanny’s on hand!
Coffee this week, a UAE based roastery “Falcon”, Ethiopia, Halo Hartume Natural. Tasting, Green tea esq, with a hint of citrus. Solid 7/10.
Espressos Consumed SB: 1556
P.