Euro

High grade bond markets have made a flying start to the year, defying the expectations of a bear market in fixed income following the end of the European Central Bank’s asset purchase programme and tightening of monetary policy in the US. Instead of the expected cautious tone, investors have been fuelling record order books, big deals and strong performance in the secondary markets, write Burhan Khadbai and Nigel Owen.

Bank Nederlandse Gemeenten received its biggest ever order book in euros for a 10 year benchmark on Thursday, allowing it to print its biggest size in the currency since 2016.

A year on from selling its first green hybrid bond, French energy company Engie returned to sell another with a slightly longer call date. Demand for the product has remained strong, but the difference in coupons showed how pricing has changed despite the borrower paying virtually no premium over the company’s secondary bonds.

Bank Nederlandse Gemeenten hit screens for its first euro benchmark of the year on Wednesday. The deal will be closely watched by the market as an important reference for what the environment looks like for the smaller euro public sector borrowers in 2019.

Export Development Canada will head out for a roadshow next month for its first benchmark in euros, taking advantage of the attractive market conditions for issuing in the currency for dollar funders. More deals could follow from debut and rare issuers in euros, with several borrowers looking “closely” at the cross-currency basis swap, according to bankers.

Despite the furore around the UK government’s defeat in getting its Brexit deal approved on Tuesday evening, corporate bond investors are yet to join the panic and remain open to buying new issues.

Italy and the European Investment received combined orders of over €50bn in the euro public sector market on Tuesday before what could be an even more uncertain period in Europe, with the UK parliament set to vote on prime minister Theresa May’s Brexit withdrawal agreement later in the evening.

SNCF Réseau will aim to boost its volume of green bonds this year in public and private markets, after cutting short its funding last year as a result of potential French railway reforms that became a reality at the end of 2018.

On Tuesday, the European corporate bond market paused to watch the developments around the UK parliament’s meaningful vote on the Brexit deal put forward by the government. But bankers are confident the market won't stop for long.

SNCF Réseau paid a significant new issue premium for its first benchmark green bond since 2017 on Monday. The European Investment Bank will issue its own 10 year euro bond on Tuesday, following trades in sterling and dollars earlier in the year.

Italy hit screens for a 15 year euro benchmark on Monday, in what will be the sovereign’s first syndication for a new issue since agreeing its 2019 budget with the European Commission at the end of last year. Elsewhere in the eurozone periphery, Greece is looking to return to the bond market with a euro syndication in the five year part of the curve, according to bankers.

On Monday, the US deliveries group FedEx returned to the euro corporate bond market for the first time since its debut visit in 2016 when it raised €3bn to finance its purchase of Dutch peer TNT Express. That deal was a four-tranche combination, but its latest deal was just a €500m 3.5 year deal to refinance the shortest tranche of the debut deal.