Commerzbank

Europe’s high grade corporate bond market pumped out deals on Tuesday, with some defensive issuers managing to print inside fair value while some of the day’s more esoteric picks had to pay up even for short maturity debt.

The lure of prestigious, fee-paying Bund syndications has driven banks to up their bids in Germany’s auctions, driving up the bid to cover ratio on its auctions and bringing down the sovereign’s cost of funds.

French car maker Peugeot, rated on the lowest rung of investment grade, amassed €2.3bn of demand for a bond issue on Thursday, enabling it to raise €1bn, after crossover credit Nokia’s success selling debt earlier in the week made it clear that there is demand for issuers with trickier stories.

Issuers are starting to feel more comfortable with the new normal of wider spreads as a flurry of deals dusted the Swiss franc market, including a rare operating-company level visit from UBS.

Issuance in the financial institutions bond market had a preferred senior flavour this week, with issuers finding this the most cost-effective funding compared with other asset classes. In addition, some of them can use it to fulfil regulatory requirements.

Rating: Aaa/AAA/AAA

Germany smashed its return to the syndicated bond market on Wednesday with its biggest ever order book and deal in the format, which was priced flat to fair value at the final spread, according to the leads.

Germany has picked the banks that will run its first syndicated transaction since 2015 and its first 15 year bond. The sovereign will likely make its market return on Wednesday. The trade forms part of Germany's updated strategy for its colossal funding programme financing the response to the Covid-19 pandemic.

Any impression that the European corporate bond market was returning to more measured levels of activity was zapped on Tuesday, when five new issues were launched that had to squeeze more than €35bn of bids into just €6.25bn of paper.

US companies Amphenol Technologies and Air Products and Chemicals have mandated banks for euro bond issues, as bankers expect Reverse Yankee issuance to rise after a spell of record-breaking volume in the dollar market.

Kookmin Bank has become the first issuer from South Korea to sell an international public bond to combat the fallout of the Covid-19 pandemic. While virus-response deals are still just a tiny part of Asia’s debt market, bankers say it is set to grow.

Europe’s high grade corporate bond market faced one of its biggest tests on Wednesday, with France’s Auchan, which operates in the heavily disrupted retail sector, getting a deal away with one of the larger new issue concessions seen in recent weeks.