ESM-EFSF

The European Central Bank’s Thursday meeting marked a return to traditionally dovish form, putting off any discussion of tapering or adjustment to monetary policy, writes Lewis McLellan.

Tranche 1: €3bn Reg S only

Investors have rarely been so supportive of public sector borrowing this side of Bastille Day. Issuers are churning out well-received benchmarks, but with a European Central Bank meeting approaching, market participants face a shortened week.

The European Financial Stability Facility (EFSF) sold its fifth dual tranche of the year on Tuesday, gaining plaudits as it added €1.5bn to a line that bankers said came under secondary market pressure when launched in February.

The European Financial Stability Facility will on Tuesday fill a gap in the 10 year area of its curve and pour some liquidity into the ultra-long end, after hiring banks on Monday for a dual tranche deal. The supranational will also likely be hoping for a repeat of its last dual tranche trade, which took a hefty €6bn chunk out its €14.5bn funding target for the third quarter.

The votes have been counted and two of last week's deals go under the GC BondMarker microscope in this week's results: a three year floater from Bank Nederlandse Gemeenten (BNG) and a jumbo dual tranche from the European Financial Stability Facility (EFSF).

The European Financial Stability Facility is set to enjoy enviable conditions when it comes to the euro market next week — during which the Greek sovereign could also make an appearance. Demand at the long end has been particularly strong due to a yield spike last week, which KfW and SCNF Réseau have since taken advantage of.

If ever there was an example of how much timing matters in the bond market, it was the European Financial Stability Facility’s dual tranche trade this week.

Rating: Aa1/AA/AA

Spiralling core eurozone government yields helped the European Financial Stability Facility pull off a cracking dual tranche trade this week, picking up a hefty €3.5bn at the long end. That led to speculation that other issuers could look to grab some long end funding before the summer — but with rates still rising and a weak French sovereign bond auction on Thursday, the window may have passed.

The long end of euro government bond curves appear to have regained their health once more after a wobble last week when comments from European Central Bank president Mario Draghi were thought to signal that quantitative easing would end sooner than expected.

The European Financial Stability Facility on Tuesday enjoyed the rare treat of bringing a dual tranche trade that garnered more interest for the longer than the shorter leg. That result surprised bankers away from the deal — but one of the leads said it may have been due to real money investors taking a punt that the end of eurozone quantitative easing is further off than some of their peers think.