The iTraxx senior financials index was back below 250bp on Tuesday, and while some Spanish bank debt was still suffering from the uncertainty plaguing the sovereign — Santander’s €1bn five year was more than 150bp wider than re-offer, around 410bp-415bp over z-spreads — bankers said the market felt more stable despite a lack of secondary buyers.
With Helaba and Nykredit launching covered bonds and the European Union in the market for a 26 year bond, bankers believe sentiment could improve over the rest of the week. But there have been no new issues in the senior market since March 28, and borrowers might reconsider their options, said market participants.
Several borrowers had been looking to issue senior unsecured in the run-up to the Easter break, said one FIG DCM banker, but they would now be most likely to be looking to the covered bond market as volatility crept back in.
“You had a spectrum of borrowers looking at senior, from the strongest names to more peripheral banks,” he said. “But now people are just looking for direction. With holidays, elections and blackouts, it’s going to be quite difficult to navigate through the calendar.”
There could be issuance next week if the market continued to stabilise, other FIG bankers said, but supply would be confined to short maturities and stronger credits.
“Issuers will have to offer a minimum new issue premium of 15bp-25bp,” said a FIG syndicator. “People always want to see the market reopening in a certain way, and even more so when it has been shut for a while. People will be focused on short trades from strong names.”
Meanwhile, the European Commission is understood to be meeting certain bank treasuries over the next couple of days to discuss incoming bail-in legislation, having released a paper detailing its final consultations on it two weeks ago.
Market participants told EuroWeek Bank Finance it was not clear which banks were involved, but indicated that a lobbying process was underway.