Europe

The State of North Rhine Westphalia (Land NRW) had to pay a large new issue premium on Thursday as it brought the first SSA deal of a volatile week.

Bankers in Paris are adjusting to a new life of lockdown following president Emmanuel Macron’s declaration of war against Covid-19 on Monday, which has led to the toughest restrictions being imposed on daily life in France since the Second World War.

AXA Bank successfully issued the first covered bond eligible for the European Central Bank’s newly established €750m Pandemic Emergency Purchase Programme (PEPP) on Thursday. But, despite the ECB’s much increased firepower, the bonds still offered a pick up of around 30bp and the funding would barely been possible without the central bank's support.

European governments are scrambling to combat the impact of the coronavirus pandemic on their populations and their economies. Although much of the intervention has been through fiscal policy and debt markets, countries are investigating taking companies back into public ownership to prop them up.

European government bond spreads have tightened in response to the European Central Bank's decision on Wednesday to beef up its bond buying. Italy’s spread to Germany contracted by more than 120bp since Wednesday morning's wide but SSA borrowers are not ready to return to the market yet.

In a sign of the strength of the Canadian banking sector, Bank of Montreal and Toronto Dominion Bank were able to access the euro covered bond market in good size on Thursday with deals that provided a substantial saving compared to senior unsecured issuance. The deals followed a series of measures to ease liquidity from the Bank of Canada, including widening repo' eligibility to covered bonds.

ING and Skandinaviska Enskilda Banken (SEB) said this week they would redeem dollar-denominated additional tier one (AT1) bonds at their first call dates, despite the economic and market implications of Covid-19.

Bankers trying to arrange finance for companies during the coronavirus crisis are being hindered by competition rules that control when and how they can talk to other banks.

Siberian Coal Energy Co (Suek) is seeking financing from lenders, according to two market sources. The borrower is braving lenders' wariness about coal companies, which last year weighed on demand for a Suek loan, and the global volatility caused by the spread of the Covid-19 virus.

Prominent short sellers have criticised European financial regulators’ clampdown on short selling as being counterproductive. Meanwhile, US hedge fund Bridgewater Associates has been unwinding its multibillion short positions in European stocks, after price falls across indices on the continent in recent days.

European banking supervisors are looking into ways to help banks offset the impact that rising credit risks will have on their capital levels, with the industry heaping criticism on the IFRS 9 accounting standard for making the coronavirus crisis even worse than it should be.

The Single Resolution Board found this week that investors in Banco Popular would not have been any better off had they been put through an insolvency rather than a resolution. Creditors and shareholders will therefore not receive any compensation.