Today we will look at two debt securities as investment ideas for this week: Hewlett Packard Enterprise Co and VEB.RF

IDEA #1: Hewlett Packard Enterprise Co

The global Eurobond market is beginning to gradually move away from the March shock. It should be noted that the liquidity crisis and the flight to quality did not spare even the highly rated securities, many of which fell in value below par. This also affected the issue of Hewlett Packard Enterprise Co with maturity in 2025, which has credit ratings at the BBB level. At the moment, the issue was losing in price 20 pieces, however, now it has won back about half of the losses.

Currently, the z-spread of the issue is 395 bp. n. In the coming months, markets do not forecast an increase in the dollar base rate. Assuming that after 6 months the spread normalizes to its average value for the last year (150 bp), this promises an increase in the price of the Eurobonds from the current 103% to 113% of the nominal.

Note that the HPE Eurobond looks very competitive against the backdrop of the most liquid US issues of a comparable rating. It was placed in November 2016 in the amount of $ 2.5 billion. Note that the paper is serviced by NSD.


Turbulence was not spared and debt denominated in euros. For example, a sovereign Russian Eurobond with maturity in 2025 depreciated by 10 figures by mid-March, and corporate papers with "investment" ratings did not lag behind in this regard. However, judging by the quotes, the acute phase of entering the liquidity is apparently already behind us, and even a timid, but still rebound, has been outlined. In this regard, it is important not to lose time and open positions in papers on interesting returns.

Our attention was drawn to the euro-nominated senior issue of the state-owned development corporation VEB.RF maturing in February 2023. Like the entire sector, the paper underwent a downward revaluation last month, although it was able to stay at a price higher than the face value. Now, with a Eurobond, you can fix a yield of about 3%, which seems to be an attractive level against zero deposit rates in euros. Please note that this tool is available for unskilled investors. In addition, the minimum lot for release on Mosbirzhe is only 1 thousand euros.

The Issuer (VEB.RF) is wholly owned and controlled by the state. Credit ratings correspond to Russian sovereign ones. Having lost the opportunity to refinance its external debt due to sectoral sanctions of the West, since 2015 the state corporation annually receives subsidies from the federal budget to compensate for the costs of fulfilling obligations on external borrowing.

VEB.RF Senior Unsecured Issue was placed in February 2013. The Eurobond volume is EUR 0.5 billion. Please note that, as with most securities denominated in euros, the issue coupon is paid once a year (February 21). Options for early recall and / or revision of the coupon level (4.032% per annum) are not provided.

Alexey Shternshis
Joint Managing Director
Capital Pi


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