The primary market is ripe for the picking for smaller, less frequent and especially debut European FIG issuers.
If lower tier banks contemplating issuance don't do it now, then when? This is not just an urge to price a YOLO trade aimed at tapping a market just because it is rosy and receptive.
This year’s two main themes that have driven the outperformance of FIG credit are that spreads have tightened and that those of European periphery credits have done so by more than those in the core. This has opened a funding window for irregular and lower tier bank issuers unprecedented in recent memories.
Investors hunting for spread and yield have compressed the bank capital structure, yet subordinated debt remains popular.
Though DZ Bank boats a huge balance sheet but it was only this week it debuted in public debt capital. The €300m sub-benchmark sale proved popular — oversubscribed and priced close to where major European banks’ similar benchmark bonds trade.
For evidence of the effect of the convergence and compression trades, Piraeus Bank married both of these trends in a landmark Greek additional tier one sale this week.
Italian regional lender Banco Desio, which even some senior market participants in London admitted to never having heard of before this week, priced its inaugural senior preferred bond, achieving international investor diversification with nearly half of the paper was sold aboard.
Everywhere in the FIG market this week was great encouragement that the time is right for the new, the small and the unusual to advance their funding plans.