Europe

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.

Governments across Europe are scrambling to support businesses as the rapid spread of the coronavirus batters their economies. In France, the state is in discussion with its advisors about preparing to step in and take equity stakes in companies showing signs of stress, according to sources speaking to GlobalCapital.

The dash for cash has had big repercussions on the short end of the covered bond market, where yields are now positive, even for German names.

The promises of economic support for economies battered by coronavirus from the UK and US governments have caused their curves to cheapen sharply, driving up borrowing costs.