Europe

While the autumn funding season is well under way for public sector borrowers in dollars, the euro market has yet to officially reopen. However, that could change next week, with a stampede of issuers ready to return in the currency ahead of the arrival of the European Union’s giant funding programme, according to bankers.

The European Commission has reached out to the European Covered Bond Council (ECBC) to make the case for reinvigorating the market for European Secured Notes. ESNs could improve access to crucial funding for Europe’s small and medium-sized enterprises (SMEs), which are struggling to recover following lockdowns imposed to contain the spread of Covid-19.

Santander UK has been quick to price a new deal in the US dollar market after its results, making a saving over the funding levels on offer in euros or sterling.

Morgan Stanley Investment Management has introduced an open-ended equity fund concentrating on high quality companies in emerging market economies.

The European Insurance and Occupational Pensions Authority (Eiopa) has told market participants to watch out for ‘further deterioration’ in solvency capital ratios, as insurers grapple with declining asset quality during the coronavirus pandemic.

A wave of companies from some of the most distressed industries will test risk appetite with rights issues this autumn, such as shopping mall landlord Hammerson and International Airlines Group, the parent of British Airways. These firms may raise the money they need and survive, but investors would be well advised to exercise extreme caution, for the future is not bright.

Consciousness of environmental, social and governance factors is snowballing among private debt and equity investors, prompting them to seek new answers to the conundrum of how to obtain adequate ESG information on private companies. Providers are trying to meet the demand, including with innovative products.

Serco is set to sell US private placements, according to market sources, a rarity from the UK support services since the sector fell into hot water with PP investors a few years ago.

Two agencies were out with dollar mandates on Monday and more public sector borrowers could follow with deals this week as a rise in US Treasury yields boosts demand for SSA dollar bonds.

Covered bond issuance usually picks up around this time of year and bankers believe next week is likely to be particularly promising. Though funding needs have generally been cut, borrowers may be tempted to move before an expected surge in competing EU government bond supply that is likely to make covered bonds look expensive.

Equity capital markets bankers are expecting to have more mergers and acquisitions to finance in the coming months as companies seek to acquire rivals weakened by the Covid-19 pandemic or try to save themselves by bulking up.

A financial markets legal charity has warned the UK against diverging from EU law through its transposition of the Bank Recovery and Resolution Directive (BRRD II), arguing that significant changes could increase the ‘operational burden’ on firms after Brexit.