Europe

Analysts have praised UniCredit for taking a conservative approach to dealing with the coronavirus pandemic, after the Italian bank said on Wednesday that it would be making higher loan losses provisions in the first quarter than had been expected by the market.

One of the co-heads of the London Group of Tradition, the interdealer broker that is one of the largest in the over-the-counter derivatives market, is leaving the firm.

Mortgage payment holidays and falling residential and commercial real estate prices will likely lead to a deterioration in the credit quality of the collateral pools securing covered bonds. But those programmes have other protective measures that will keep investors well insulated. And, if they need more protection, issuers can easily assuage their and rating agency concerns by adding collateral.

Financial institutions with funding needs that are holding off in anticipation of better issuance conditions are doing it wrong. Waiting until the other side of earnings season to bring deals will likely prove a mistake.

Canadian banks should be applauded for funding themselves in public with deals bought by real investors in a range of currencies at actual market clearing levels — astonishing though that may be for the many entitled European issuers that have shamelessly become accustomed to central bank funding.

Any concerns over Italy’s market access were vanquished on Tuesday when the sovereign received €110bn of orders for a dual tranche bond syndication, allowing it to raise €16bn as it makes inroads into its enlarged funding task in response to the coronavirus pandemic.

The prices of Western Canada Select and West Texas Intermediate dropped below zero during trading on Monday, spelling trouble for issuers in the already underperforming Norwegian krone and Canadian dollar.

Helaba has been far more active than other arrangers in the Schuldschein market, launching at least three deals after the pandemic struck European capital markets in March. While others told clients to postpone deals until clarity emerged on price and investor appetite, the Frankfurt-based Landesbank has ploughed ahead.

With its more relaxed rules around pre-emption rights, the UK has led from the front by allowing embattled companies to raise equity to keep themselves alive during the coronavirus pandemic. The market's flexibility means there have been no damaging delays waiting for for formal rule changes. Such pragmatism is admirable, although more must be done to protect retail investors from dilution.

A eurozone bad bank would have been difficult to institute even without the coronavirus crisis to spur it on. Now, with countries diverging on moratorium measures in response to the pandemic, it’s verging on impossible.

Covered bonds easily deliver the most competitively priced funding for banks, but the real value for issuers lies in the long end which, for the time being, is too expensive.

Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Tuesday, April 21. The source for secondary trading levels is ICE Data Services.