Euro

Bank credit investors are showing they won’t be forced into buying every new euro deal after the summer break, as they appear content to wait for further supply.

The European Investment Bank re-opened the primary euro public sector bond market with a decent outing in the 10 year part of the curve on Tuesday. Finland is next up, hitting screens for a deal of the same tenor expected on Wednesday.

The bank bond market burst back into life on Monday, with BNP Paribas and Commerzbank shedding light on favourable pricing conditions in euros following the summer break.

Analysts at Société Générale say that bank credit spreads have plenty of room left to tighten in 2020, especially as supply volumes fall in the second half of the year.

The euro/dollar cross-currency basis swap has moved back in favour of euro issuance for the first time in three months, but with a wall of euro supply looming, the favourable level may not be enough to entice issuers away from the dollar market.

Trading volumes for European investment grade and high yield corporate bonds reached the lowest volume of the year in July as the market paused for breath following a record pace of issuance since the onset of the coronavirus pandemic.

Although the MTN market contracted during the first half of 2020, structured issuance rose. The bulk of the increase came in the form of notes with calls added to enhance yield.

A pair of German sub-sovereigns had the primary public sector bond market to themselves this week, with each taking €500m at tight levels to their secondary curves.

The State of Lower Saxony was the sole borrower active in the primary public sector bond market on Thursday as it raised €500m with a 10 year at a negative yield. The deal ended up comfortably subscribed in spite of a slow start to the book-build.

The State of Lower Saxony mandated banks on Wednesday to run a 10 year euro benchmark on Thursday, as German states remain the only action in the public sector primary market.

Spain has submitted an application for more than €20bn from the EU’s Support to Mitigate Unemployment Risks in an Emergency (SURE) fund.

The Agence France Trésor (AFT) has suspended Morgan Stanley’s primary dealership in French government bonds, making it the first bank to suffer such a proscription.