There are few stronger credits in senior financials than Nordea. So it was right and proper that the Swedish bank was the one to delight supply-starved investors with a €1.5bn five year deal on Monday.
It printed the deal at 55bp over mid-swaps, after initial guidance of 60bp area.
The last time buyers had fresh five year euro paper to pile into was Morgan Stanley’s €1.25bn deal just over a month ago, priced at 145bp over mid-swaps. For the last five year from a European darling, you have to go back to ING’s €1.75bn deal on February 20, printed at 85bp over mid-swaps.
And on Monday investors certainly did pile in, to the tune of €3bn. But there was something amiss.
Where were the rolled eyes at the super-tight spreads enforced on the highest quality names by super-low swap rates? And what happened to core deals struggling to get headline-grabbing books because they offer such tiny yields?
It turns out that Nordea has revealed a change of attitude among the buy-side towards those boring, super-tight spreads. Nordic accounts took 19% of the deal. Germany, Austria and Switzerland accounted for the same amount and French accounts took 18%. There were also good bids from Asia (13%), other European accounts (12%) and the UK at 10%.
That looked rather different to the German-dominated deals of earlier in the year, which bankers attributed to an unwillingness of anyone other than German accounts to get involved at aggressive levels.
Quite — Germany and Austria took 30% of ING’s €1.75bn February deal at 85bp over mid-swaps. They gobbled up a third of both a Goldman Sachs €1bn 10 year at mid-swaps plus 155bp and a Commonwealth Bank of Australia six year at mid-swaps plus 55bp at the end of January.
Fill your boots, then?
FIG bankers hope that investors’ rekindled affair with the best names will bring more of them to market to take advantage of what Armin Peter, UBS’s head of FIG flow syndicate, on Tuesday called the “growing desperation” of investors.
But market participants shouldn’t get carried away — borrowers with less to do and all year to do it may still take the view that funding at the tail end of another brief eurozone wobble is neither smart nor necessary.
Nonetheless, investors are clearly learning to love tight spreads again. That makes for an attractive market for Europe’s elite — if and when they want to use it.