Banks

Investors were keeping cash from the private debt markets this week, though borrowers that have a definite issuance plan have been able to continue with their strategies.

Investors are returning to the covered bond, sovereign and supranational agency (SSA) markets in their droves. Despite exceptionally heavy issuance, the startling breadth and depth of demand seen in many deals this week caught market participants off guard — not least the investors themselves. Bill Thornhill reports.

Fearful of missing out and in the absence of competing credit supply, investors piled into higher yielding covered bonds offered by Canadian, Australian and Swedish issuers this week. A negative new issue premium Royal Bank of Canada’s five year epitomised the state of investor frenzy.

Société Générale this week issued a highly oversubscribed €1bn eight year that paved the way for follow-on French covered bonds from Credit Mutuel CIC — which attracted a €5bn order book for its two part deal — and La Banque Postale.

French hotel company Accor launched new hybrid and senior bond issues on Thursday after announcing the deals at the end of last week. The new deals finance tender offers for some of the company’s existing hybrid and senior notes.

High grade corporates are champing at the bit to access the dollar market as credit spreads continue to rally and investors continue to put money to work.

Germany’s largest residential property company Vonovia attracted €4.5bn of demand for its latest deal on Thursday, as the property sector continues to be one of the more popular in the corporate bond market.

IBM returned to the euro corporate bond market for the first time since 2017 on Thursday, to sell its largest ever deal in the euro market and to push into a maturity not seen from a corporate issuer so far in 2019.

French supermarket chain Auchan attracted plenty of demand for its third consecutive January new issue but it had to pay a hefty new issue premium to ensure the deal got done. The supermarket sector is one of several retail sectors priming investors for poor annual results.

Japanese banks are unlikely to enjoy any let-up from razor-thin net interest margins in 2019. This is worrying for their long-term sustainability, but it’s potentially a bonanza for DCM specialists in Europe and the US.

World Bank on Thursday added to a record breaking start to the year for public sector sterling issuance with yet another large trade. A German agency is set to bring another deal this Friday in a market that shows no signs of slowing down.

Oesterreichische Kontrollbank’s decision to mix up this week’s dollar supply with a three year benchmark reaped rewards on Thursday, as it recorded one of its largest ever allocations to central banks and one of its tightest ever US Treasury spreads. But some SSA bankers believe the dollar market might need a “breather” after a rampant start to the year.