Europe

The Italian government’s economic growth expectations are likely to take a hit from “unintended tightening” of monetary policy if BTP yields keep rising, investors have warned.

New liquidity requirements will cause a boom in senior bond issuance in the same way that the introduction of capital requirements led to a surge in the supply of subordinated debt, according to analysts at JP Morgan. The analysts said that investors have been underestimating how quickly this trend will impact the euro market.

The IPO of German brake manufacturer Knorr Bremse is hoping to buck a trend of falling IPOs, which have been battered by general market volatility, books will close at noon today and the deal will be priced at €80 a share.

KfW and the Province of Ontario will hit separate parts of the dollar curve on Wednesday, with the former circulating what one on-looking banker described as “punchy” price thoughts. The deals followed a well-received floating rate note from a German Land that doubled in size.

A new Spanish real estate fund, Arima Real Estate, is seeking to list on the Spanish stock exchange in a fixed price listing worth up to €300m.

There is no question that Portugal is one of the success stories to come out of the eurozone sovereign debt crisis. Its 10 year yield, for instance, has recovered from above 16% at the peak of the crisis in 2012 to around 2% today. Amid the current pressures in the eurozone, precipitated by Italy's budget fiasco, Portugal has remained resilient. But rightly or wrongly, an escalation of matters there, or indeed elsewhere in the eurozone periphery, would bring extra pressure to bear.

Wednesday will be debut day in the green bond market, with Ireland preparing a 12 year inaugural euro benchmark and Société du Grand Paris (SGP) out with a 10 year that will also be its first bond issue of any kind. Both must contend with a market backdrop rife with Italian politics-driven turbulence, although SGP’s deal has so far had what one lead called “one of the strongest starts I’ve seen for a French issuer”.

Newlon Housing Trust, a north and east London housing association rated A3 by Moody's, has returned to the US private placement market, raising £135m.

The UK Debt Management Office won big demand for a reopeing of its longest outstanding bond on Tuesday, with a final order book that was over five times covered.

The European Stability Mechanism completed over 50% of its funding target for the fourth quarter on Tuesday with its first three year euro benchmark since 2015.

The European high yield market appeared unfazed by the spike in Italian risk despite its heavy exposure, with calm secondary trading and Italian names daring to roadshow for new bonds.

UK electricity distributor Western Power Distribution returned to the corporate bond market on Tuesday for its regular annual fourth quarter outing, but this time had to accept a significant new issue premium as it raised £350m.