Europe

The Republic of Serbia hit euro markets on Monday as it worked to stack up funding for its fight against the Covid-19 coronavirus, selling a seven year bond.

The lure of prestigious, fee-paying Bund syndications has driven banks to up their bids in Germany’s auctions, driving up the bid to cover ratio on its auctions and bringing down the sovereign’s cost of funds.

Equity bankers expect to be busy with more capital raising in the next few weeks as UK corporates prepare for a prolonged period of business interruption after the government laid out plans for a slower reopening of the economy than many had hoped for.

European airlines are expected to turn to the equity capital markets soon for financing if they have no recourse to state aid, mirroring their peers on the other side of the Atlantic.

An abundance of cheap central bank funding has negated the need to issue short dated covered bonds but access to competitive funding at the long end would provide a compelling reason for issuers to return to the primary market, said bankers on Monday. A seven year transaction mandated by Hypo Noe on Monday is likely to provide a test of investor appetite.

Deutsche Bank sold a new tier two on Monday while offering to buy back some of its non-preferred senior debt from investors. The liability management exercise will help the issuer adapt its balance sheet to a new regulatory environment amid Covid-19.

HSBC Canada issued the most oversubscribed dollar-denominated Canadian covered bond in years on Thursday, and still managed to price 28bp tighter than the Canadian heavyweights.

Despite a crash in dollar swap spreads as the US Treasury announced a record borrowing binge this week, SSA bankers remain bullish on supply, with KfW rumoured to be plotting a return to dollars after leaning heavily on euros for its benchmark funding this year.

The merger of the UK’s largest mobile phone operator, O2, with cable company Virgin Media, agreed on Thursday, will generate a £6bn financing need which the parties want to complete before the deal closes, expected to be in 2021 — and later on, it could lead to an IPO, say sources close to the deal.

The Norges Bank surprised the market with an unexpected base rate cut to a record low of zero on Thursday. Since the start of the year, coronavirus volatility and wildly gyrating oil prices have buffeted the value of the kroner.

Costain Group, the London-listed construction and engineering firm, has completed the first leg of a heavily discounted £100m capital increase that it originally announced in March following poor 2019 results.

This week's scorecard looks at the progress Nordic agencies have made in their 2020 funding programmes in early May.