Austria

Kommunalkredit Austria is in the market today (Friday) with a three year government guaranteed senior debt issue at a wider spread than was heard earlier this week, after Caixa Catalunya got its deal over the line yesterday (Thursday).

Erste Bank yesterday (Thursday) continued this week’s trend of pricing government guaranteed issues in line with guidance, some at tighter levels than the most recent deals from the respective jurisdictions. Meanwhile a third Spanish bank is preparing to follow in Caja Madrid's footsteps.

Erste Bank is in the market today (Thursday) with its second government-guaranteed transaction. The deal is the fifth Austrian government-backed bond, and Erste's first in the five year maturity.

CIF Euromortgage has added Eu70m to its 4% October 2016 issue, continuing France’s domination of jumbo supply through taps and new deals in January into February. Meanwhile the government-guaranteed sector in euros was subdued.

Real money demand and a strong domestic bid coupled with healthy participation from foreign investors contributed to a successful move into the unguaranteed senior debt market by Commerzbank on Friday.

Government guaranteed issues from La Caixa and Raffeisen Zentralbank yesterday (Wednesday) were both priced tightly in terms of their premiums versus their respective sovereigns. But while this did not get in the way of the Austrian bank’s transaction, syndicate officials away from the Spanish deal have criticised the spread.

Activity in the euro government guaranteed bank debt market has picked up since Monday’s Swedbank issue, but only moderately. And despite an improvement in market sentiment, covered bond banks are keeping investors waiting for a follow-up to last week’s jumbo from Crédit Agricole.

The government guaranteed bank debt market was the juncture of two waves of negative sentiment in the markets this week, as downgrades hit the sovereign market and financial institutions suffered renewed pressure.

Erste Bank will this (Friday) afternoon price the first Austrian guaranteed bank deal, two days after agreeing a debt issuance programme with the country’s Finance Ministry. Meanwhile a new, unique government-backed name could emerge next week.

Rating action: Moody’s yesterday (Thursday) placed on review for possible downgrade the long term debt rating of Austria’s Erste Group Bank (Aa3).

Moody’s yesterday (Wednesday) placed on review for possible downgrade the public sector covered bonds of Hypo Alpe Adria International (HAAI) that do not benefit from a grandfathered guarantee from the State of Carinthia.

Although the government guaranteed bank bond sector is maturing in the UK, the impact of broader issuance on the rest of the fixed income market has yet to fully play out, with the sovereign, supranational and agency sector throwing up new pricing surprises and some countries just beginning to gear up for issuance. Another shocking level appeared on screens only this (Monday) morning.