Europe

The covered bond market appeared well supported this week with the success of new deals suggesting scope for spreads to tighten further, especially Asian bonds. However, the long end of the curve could prove vulnerable as SSA supply ramps up, especially from the EU, which will be funding its coronavirus rescue package in the bond market, according to a covered bond trader with a good share of the market.

Luxembourg became the first European sovereign to publish a sustainability bond framework this week, breaking the pattern, to which Germany became a notable addition on Wednesday, of governments printing green deals. But sustainability bonds make much more sense for countries large and small.

Merck, the US pharmaceutical company, launched a chunky €1bn hybrid on Wednesday, as syndicate bankers said they expect even more subordinated corporate debt despite the flurry since returning from the summer break.

The Hellenic Republic returned to the market this week to tap a June 2030 line, raising €2.5bn with its third syndication of the year.

The Grand Duchy of Luxembourg has become the first European country to publish a sustainability bond framework and has mandated banks to prepare a debut deal in the format.

Banco de Sabadell on Wednesday looked to replicate the success of Mediobanca earlier this week in capitalising on appetite for green bonds. Appetite for the Spanish lender’s inaugural green preferred senior bond led it to print the deal through fair value.

The European Stability Mechanism hit dollar the market on Wednesday with a five year benchmark — its fourth ever in the currency. Two Nordic issuers are set to follow suit on Thursday.

Virgin Money UK tested the strength of the sterling market this week by looking to raise tier two debt. The UK lender was able to tighten pricing by 50bp and print inside fair value, and the new trade accompanied a tender offer of the issuer’s old securities.

BPCE’s seven year benchmark issued on Wednesday was subscribed more than six times and priced flat to the curve. The "overwhelming" demand caught leads off-guard and suggests eurozone issuers can now price deals with negative new issue premiums (NIPs) for deals with a restricted size.

Germany received overwhelming support for its debut green bond on Wednesday, which was sold via syndication and twinned with a conventional Bund of the same maturity and coupon in what it is a brand new structure for issuing green debt.

Equity capital markets investors welcomed the return of Russian deals on Tuesday night as two large shareholders exited Detsky Mir, the children’s retailer. Bankers expect more deals to come and are urging sellers, if possible, to come to market early to avoid running close to the US presidential election in November.

Belgian fintech company UnifiedPost Group has announced its intention to float on Euronext Brussels.