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Investors free up cash as pipeline slows to trickle

Investors are spurning secondary markets for primary action in a bid to rake in the new issue premiums on offer.

That’s led to a softer secondary market tone so far this week, but the pipeline for primary deals has slowed to all but a trickle as issuers wait for the indigestion to subside.

So far, less than €1.7bn in euro denominated deals have seen the light of day this week, compared to about €10bn last week. NIBC reopened the July 2018 senior unsecured bond, originally sold in January, to the tune of €200m on Monday, while Unipol Gruppo Finanziario wrapped up a tender and exchange of two outstanding senior bonds, printing an additional €685.563m in 10 year bonds.

On Tuesday, Jyske Bank priced a €500m three year floater, emptying out the visible pipeline but for Norway’s DNB Bank, which is planning to sell its inaugural dollar denominated additional tier one in the near future.

Barclays and BNP Paribas have both embarked on some internal restructurings, with BNP Paribas shaking up its syndicate teams, merging high yield and leveraged finance, and Barclays moving heads around on its own syndicate teams in London.

The US Federal Open Market Committee begins its two day meeting today, and market participants are expecting Federal Reserve chair, Janet Yellen to amend its language to prepare the market for a rate hike.

Investor’s reach for yield in CBs

Activity in the European covered bond market began to slow this week with just two benchmarks emerging mid-week.

Nationwide mandated leads on Tuesday and opened books on Wednesday for its first deal this year, and the first from a UK bank in euros. The issuer began with initial price thoughts for the 12 year that looked generous to its curve.

At the same time, Caixabank mandated and opened books for a 10 year benchmark. The choice of maturities means that six out of the last 10 euro benchmarks have been issued at the long end of the curve, illustrating that issuers are striving hard to meet investors’ demand for yield.

As investors look to take profits after a strong rally in the first quarter of the year, the tone of the covered bond market was softer going into mid-week. Negative headlines out of Austria have further depressed the mood, and Austrian covered bonds have been underperforming as a result.

ABS supply deepens

While fundamental concerns remain about the European Central Bank’s ability to generate a meaningful pick-up in Eurozone ABS issuance without further diminishing its investor base, it is hard for investors to complain about the variety on offer this week.

Chief among these is the €175m DECO-2015 Harp Irish CMBS that Deutsche Bank officially began marketing on Tuesday, with the launch of the first such deal since the financial crisis neatly timed to coincide with St Patrick’s Day.

Almost as rare as an Irish CMBS is the French credit card securitization that Natixis announced on Tuesday. FGA Bank added another Italian auto ABS to the pipeline on the same day, while the Netherlands’ NN Bank has mandated banks for a public syndication of Hypenn-branded Dutch prime RMBS.

This all comes after Paragon printed UK buy-to-let RMBS in euros and Santander printed UK prime RMBS in dollars, while Tagus is yet to price its third Volta electricity tariff deficit receivables trade.

Graham Bippart +44 207 779 8715

Bill Thornhill +44 207 779 7325

Tom Porter +44 207 779 7324

Nathan Collins +44 207 779 7318


FIG coverage highlights:

Barclays FIG syndicate veteran switches to treasury

BNP Paribas merges HY and levfin in wider syndicate reorg

Unipol lengthens debt profile with exchange

Jyske trade highlights investor focus on primary market

NIBC covers €200m tap in time for secondary wobble

Profit taking sets in as Austria underperforms

Heta fallout hits German, as well as Austrian covered bond issuers

Paragon euros fly in on 3.3x subscription

Yield search leads AXA to vintage US CLOs

Paragon euros preferred as price stickiness persists

ABS spreads lag as ECB pulls QE trigger

Santander targets £1bn of Fosse RMBS

Santander adds two year to Fosse RMBS in dollar delivery

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