The big event in October was the expectation of a proposal by Europe’s leaders to resolve the euro zone crisis. The European Summit held on Wednesday 26 October delivered a coherent message and much-awaited announcements: recapitalisation of European banks, a larger European haircut and an EFSF guarantee plan. On the whole, macroeconomic statistics were better than expected, especially in the US, thus chasing away the spectre of a global recession.

As a result, the euro zone equity markets posted a very positive performance of +8.96% over the month.
With hopes hanging on the announcements following the European Summit and globally better-than-expected macroeconomic statistics, the German 10-year rose from 1.88% to 2.18% this month. And yet, uncertainties remain. Moody’s stated it was giving itself three months to assess the stable outlook of France’s AAA rating. The OAT/Bund spread promptly peaked at 119 bp on 24 October, a new record since the creation of the euro zone. Peripheral country spreads remained under pressure: Italian yields ended the month at around 6.08% and Spanish yields at around 5.52%. There was, however, something of a pick-up in investor appetite for corporate high yield and BBB bonds. BBB index spreads tightened by about twenty points to 285 bp on average. Against this backdrop, the fund sold its Deutsche Lufthansa 6.5% 2016 and Italcementi 5.375% 2020 lines and initiated a line in Nederlandse Gas 3.625% 2021.
Companies continued making their way back to the primary market, a trend begun last month, with the launch of new issues such as Enel with maturities of 2015 and 2018 and actuarial returns of 4.625% and 5.75%, i.e. margins of 380 bp and 427 bp versus the Bund, Carrefour 5.25% 2018 issued at Bund +360 bp, and Telecom Italia 7% 2017 issued at Bund +570 bp.