Europe

Europe’s corporate bond market needs some good news — or an issuer who cannot wait — before issuance will resume, after Italy produced at the weekend some of the continent’s worst political news for many months.

EU member states agreed on a wide-ranging banking package last Friday, aimed at reducing risk in the European banking sector, but Brussels sources are divided as to whether the new measures are enough to swiftly complete the Banking Union.

High yield bonds have sold off as financial markets have been rocked by the collapse of Italy’s coalition government-in-waiting — but a deeper concern is that the real cause of the weakness is anxiety about Europe’s economy itself.

It’s hard not to feel sympathy for Italian president Sergio Mattarella, who felt obliged to reject the Five Star Movement and Northern League nominee for financial minister to assuage investor concerns, but the decision will likely strengthen Italy’s radical political forces.

Turkey’s Central Bank is fighting a losing battle, after its latest bid to protect its currency failed to prompt the support from investors that it hoped for. The move brought the CBRT closer into line with international standards, but could soon be irrelevant after elections on June 24.

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.

Old Mutual plc, the South African insurance and wealth management group, has launched the London listing of Quilter, formerly Old Mutual Wealth Management, one of the final stages of the “managed separation” that will split its business in four.

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.

An escalation of political risk in Italy has rattled investors, substantially increasing hedging activity this week as concerns ramped up about the future of the eurozone.

Helaba and VC Trade launched a digital platform with the hope of transforming the market, but the big test was whether other arranging banks would be convinced to join up. Two months later BayernLB is co-arranging a transaction with Helaba — which could be the first sign of broader acceptance of the platform.

In the face of rates volatility Toronto Dominion has decided against an intraday deal execution and has instead mandated for a covered bond that should be launched on Wednesday.

Oberbank was comfortably subscribed on Tuesday for its debut covered bond, which was priced in line with a recent French benchmark despite being only €300m in size, having a tricky 15 year tenor and arriving amid increasing volatility in credit markets.