Europe

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.

The seven year area of the covered bond market is in danger of becoming over-supplied after a series of deals around that tenor this week. But with the pace of supply expected to slow and technical conditions still positive the overall health of the market still seems good.

Provident Financial issued a £250m five year senior bond that traded sharply higher in secondary after its launch on Wednesday, leaving market participants at odds about the pricing of the deal.

The Netherlands Development Finance Company (FMO) has added another product to its local currency offering after selling its first ever note linked to the Tanzanian shilling. The deal came in the same week that World Bank debuted in Peruvian soles.

Sour trading conditions in the European primary market this week have raised concerns that banks will either have to pay up significantly if they want to press on with their funding plans, or they will have to put off their deals until after the summer break.

Five year covered bonds issued this week from a trio of issuers got the best executions with the most generously priced Canadian deal from the Fédération des caisses Desjardins du Québec (CCDJ) earning the most praise.

Frozen bakery supplier Aryzta’s shares fell by as much as 30% on Thursday as it issued a profit warning that full year Ebitda was expected to be 9%-12% lower than guidance released in January. This is a cause for concern for Schuldschein lenders endeavouring to rid the market of the stench left by Carillion and Steinhoff.

The covered bond market enjoyed one of its most active weeks this year, with as many as eight transactions launched, even as other markets struggled. However, while most issues were well received, the two longest dated deals dragged and showed investor concerns over duration.

Rating: Baa2/BBB/BBB+

Vodafone was welcomed with open arms in the US as it printed the biggest dollar bond in its history, executing a quick fire acquisition financing.

After the Whit Monday holiday in Europe, Deutsche Telekom boldly re-opened the corporate bond market. Having seen compatriot Bertelsmann pull a deal on Thursday, Europe’s largest telecoms provider showed no fear when it sold a four-tranche offering.

German energy supplier Innogy found the corporate bond market tough going for its latest new issue, despite marketing its deal for two days. However, it did execute the deal in a week that saw two corporate bond deals pulled, and despite an M&A shadow hanging over the company.