An increase in new issue premiums compared to the skinny levels on offer at the end of last year helped lure investors, despite weak sentiment in the opening trading days of 2015.
Wednesday’s FRNs are among the first from banks to hit screens this year, along with two fixed rate deals from Abbey National and Banque Fédérative du Crédit Mutuel.
Syndicate bankers blamed the slow start to the year on holidays in Europe for Epiphany on Tuesday, but said this crop of borrowers were ideal names to restart the FIG market.
“Investors like to see solid names as the first out of the gate,” said a FIG syndicate manager not involved in the deals. “Rabo are obviously well regarded as a solid European issuer, while Canadian banks are generally well received.”
Citi, Goldman Sachs and Rabobank set pricing on Rabo’s €2.5bn two year floater at 19bp over quarterly Euribor, at the tight end of guidance of 20bp area.
The deal drew an order book of around €3.5bn.
Société Générale is also selling a €2bn two year floater at 27bp over quarterly Euribor, in line with guidance of 27bp area. Initial price thoughts on Wednesday morning were 30bp area.
Attractive new issue premiums will have helped drive demand for the deals, according to FIG syndicate bankers.
“If issuers are willing to offer generous initial price thoughts then they’ll get a good reaction,” said a London syndicate manager. “It’s important to offer a decent new issue premium. It’s most obvious in the fixed rate deals, but even the two year FRNs are offering 4bp-5bp of new issue premium. At the back end of last year you would have seen 2bp at the most.”
While Rabo and SocGen hit the short end of the curve, Bank of Nova Scotia went for five years.
Deutsche Bank, Goldman Sachs and Scotiabank set pricing at 38bp over three month Euribor, the tight end of 40bp area guidance.
The order book was around €1bn at the last update.