Europe

Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Monday, July 27. The source for secondary trading levels is ICE Data Services.

The outlook for covered bond spreads has become less clear cut following last week’s historic agreement on the EU’s coronavirus recovery fund, according to analysts. But bank traders believe the market is well protected and think that the biggest risk to spreads is if there is a broader credit and equity market sell-off.

The European Central Bank recommended this week that banks do not pay dividends or buy back shares until the start of 2021 at the earliest. It is also calling for 'extreme moderation' over banker bonuses during the coronavirus pandemic.

Equity bankers have expressed fear that issuing IPOs this autumn is set to be far harder than expected, with Covd-19 showing little sign of abating and a second wave feared in the colder months.

The European Central Bank said on Tuesday that it would not be pushing banks to meet their Pillar 2 guidance or their combined buffer requirements until at least the end of 2022, as part of its efforts to encourage more lending to the real economy.

At a consultation on Monday, Gilt-Edged Market Makers and investors were divided on the UK’s proposal for a new 15 year Gilt to be sold through syndication in September.

Mortgage payment holidays across Europe, offered to help borrowers cope with the economic effects of lockdown, were highest in UK covered bond pools, according to the European Covered Bond Council’s newly updated harmonised transparency template (HTT). But that reflects the ease with which homeowners could apply for the breaks rather than the likelihood of those loans turning into bad ones.

The needs of the economy during the coronavirus pandemic could alter the Single Resolution Board’s assessment of whether a failing bank needs to be put into resolution or insolvency.

German pharmaceutical company, Phoenix Pharmahandel (Phoenix Group), held investor calls on Monday after mandating banks for a sub-benchmark sized offering in euros. The deal is the latest stab at funding by a pharmaceutical company — a sector which has lured greater numbers of investors thanks to the coronavirus pandemic.

Equity capital markets have been relentless since the first coronavirus rescue issues in the spring. There is no let-up, with several large deals announced in the past fortnight and scheduled to be priced in August. However, bankers are worried that tired investors are near breaking point.

ANZ has altered the pre-maturity test of the hard bullet transactions in its covered bond programme, by doubling the time the covered bond guarantor has to sell assets. The "investor-friendly" update, which improves rating stability, follows ANZ’s recent downgrade and could be of interest to other issuers in a similar situation.

The additional tier one market is putting too much emphasis on the risk that banks will try and extend the lives of their bonds, according to Atlanticomnium, suggesting there is plenty of room for the asset class to rally this year.