Euro

Rentenbank on Tuesday sold what Dealogic data shows is its largest ever euro benchmark, while the State of North Rhine Westphalia visited the long end of the curve.

Carrefour, the French supermarkets group, sold Europe's second corporate bond deal of the week on Tuesday, as the market slowly recovered from the volatility of the previous week. There still remained some nervousness around market conditions, however, so Carrefour had to ensure it offered investors a healthy premium.

The State of North Rhine-Westphalia (Land NRW) hit screens on Monday to announce a long dated euro benchmark.

The Basque Government will bring the first real test of investor appetite for Spanish public sector risk since a wave of Italy-led volatility hit the eurozone periphery last week, as it opened proceedings on an inaugural sustainable bond — its first issue of any kind in over two years.

On Monday, Volkswagen reopened the euro corporate bond market after a blank week. The German car company’s financial arm was the only corporate issuer to brave the market on the day and, despite issuing a €1.5bn triple tranche deal, kept its longest maturity at six years.

Government bond yields and swap spreads suffering a state of vibrato from the political fugue in Italy this week led to near silence across the primary public sector bond market. But issuers are hopeful a period of relative calm late in the week will last — although they admit investors are holding the baton.

Italy passed its first debt raising test since its yields blew out earlier in the week amid fears of another round of elections, as it auctioned bonds near the top end of its target volume range on Wednesday. But the sale did show the elevated borrowing costs the country faces.

Fears over Italy’s political woes spilling over into a full-blown eurozone crisis eased on Wednesday morning, as investors welcomed news that another round of elections could be avoided.

The violent moves in Italy’s curve since its president blocked the formation of a populist government may well be a sign of things to come, as government bond markets adjust to the post-crisis world of dwindling bank balance sheet support — and no central bank help.

Bond market havoc following the Italian president’s decision to appoint a technocratic government has shut the euro market for most public sector borrowers. Volatile swap spreads are making issuance near impossible, while an “enormous” flattening in Italy’s curve is of particular concern for that sovereign, said one head of SSA syndicate.

Guarantor: France

The political manoeuvrings in Italy’s path to being governed — as well as poor eurozone economic data — played havoc with rates this week, leading to SSA deals either paying higher new issue concessions, or falling short of subscription. More volatility could come, after the country’s president approved the likely coalition partners’ choice of prime minister but held back from appointing a eurosceptic economist to take charge of the country’s economy. Craig McGlashan reports.