Yorkshire Building Society’s deal from the 4 June, the day before Draghi’s speech, is trading 9bp tighter from its 22bp issue price, while Dexia’s €500m June 2019s issued on June 3 at 27bp are now trading at 13bp bid.
This strong appetite will set the tone for next week – the first week in June not broken by German public holidays.
“Wider credit markets had a strong reaction to the Federal Open Market Committee statement yesterday. There’s definitely still some liquidity to put to work before summer,” a London based syndicate banker said.
“Conditions could easily change in autumn. Wise issuers will want to take advantage of the strong market conditions while they last.”
“Most deals that have come in core markets during the last few weeks have seen a pretty muted spread performance, but then new issue premiums have been limited.” a trader said on Thursday morning.
“But fundamentally they’ve held in well – the sign of a strong, healthy market.”
UK excels
Another trader said that Wednesday’s dual tranche Nationwide deal was the exception to the skinny new issue premium rule.
“Clearly Nationwide is the big mover,” he said. “The spread still looks generous and I’m very bullish about it - think it’s still got performance potential left. It was very generous for Nationwide to have left something on the table. They could have priced tighter.”
However, as the deal priced, the five year spread of 8bp was seen in context of Lloyds’ April 2021s bid at 10bp, and RBC’s June 2019s bid at 7bp, suggesting pricing was in line with fair value and offered little new issue premium.
At 31bp, the 15 year priced in line with where Caffil’s recent tap of its October 2028 was bid at 31bp.
However, the market evidently saw value at these levels, as the five and 15 year tranches were bid 3bp and 4bp tighter at 5bp and 27bp respectively on Thursday.