Coronavirus

The dash for cash has had big repercussions on the short end of the covered bond market, where yields are now positive, even for German names.

The promises of economic support for economies battered by coronavirus from the UK and US governments have caused their curves to cheapen sharply, driving up borrowing costs.

Companies are eyeing the European corporate bond market with a view to issuing when they see a chance, but hopes that deals could restart on Wednesday after Tuesday’s heavy US issuance were dashed when markets weakened overnight. Amid the turmoil, bankers are eager to try the new “straight to launch” syndication method being used in New York.

Eurozone government bond yields jumped higher early on Wednesday morning, unmoved by reports of a potential breakthrough for the issuance of common EU debt instruments. The European Central Bank is suspected to have stepped in to try and control the situation, with spreads to Bunds having moved to their widest points for a year or more.

The US Commodity Futures Trading Commission gave market participants adapting to working from home some relief late on Tuesday, with sweeping no-action relief on voice recording requirements. The UK’s Financial Conduct Authority hasn’t gone so far, but has offered firms some flexibility.

UK manufacturer Dyson is looking for at least £250m of debt, according to several market sources, in a private placement set to close in the middle of the pandemic that has largely shut public markets in Europe and the US.

CapVest has cancelled the planned sale of Curium Pharma, as market conditions wrecked the investment appetite of the three final round bidders and banks cut financing commitments. It was one of the larger M&A financings slated for syndication in the second quarter, but with the Crossover index now trading over 650bp, compared with close to 200bp when first round bids were due, the three sponsors in the final round would have struggled to get a deal away.

The wild daily swings in equity markets and stratospheric levels of volatility caused by the Covid-19 crisis has left equity capital markets bankers with very little to do, beyond waiting for the market to find a floor when executing transactions becomes feasible once again.

Governments in the Western world unleashed enormous spending packages this week to fight the economic effects of the coronavirus pandemic. But corporate bond investors want more.

China Huiyuan Juice Group is contemplating a restructuring to improve its liquidity position, after failing to avoid a bond default due to the Covid-19 outbreak. The company is also facing a delisting from the Hong Kong Stock Exchange.

Executing bond syndications from home has proved to be feasible, bankers said in the wake of Royal Bank of Canada’s five year covered bond issued on Tuesday. Even so, the lack of physical back-up from nearby colleagues and the seamless access to certain key functions such as trading means that working from home is very much second best in practice compared with normality.

Intesa Sanpaolo will provide Italian companies with €5bn worth of new one to 1.5 year loans, and offer an additional €10bn of debt to customers through existing credit lines, to help steer the nation's economy through the Coronavirus crisis.