Europe

BPCE and Banca Farmafactoring launched senior deals this week, with both issuers enjoying healthy receptions to their offerings. BPCE’s non-preferred mandate drew over €2.75bn of orders and the Italian issuer saw its preferred bond attract €850m at the spread level.

IPOs are having another rough October as declining investor sentiment in new listings has led to a number of new deals being postponed. While there are still new deals being launched, markets have become increasingly difficult.

The Italian cabinet’s late night agreement on a draft budget for 2020 will drive investors to hold longer maturity BTPs, causing spreads to tighten ahead of a potential rating outlook upgrade next week, said analysts.

The postponement of Argenta Spaarbank’s non-preferred senior bond on Tuesday was a reminder that investors are not taking a shine to everything sent their way in the market. The large volume of trades this year has prompted investors to become “selective” about what they buy, analysts at Rabobank said.

Russian potash producer Uralkali hit the market on Tuesday, tightening pricing on a $500m bond issue, the borrower's first international deal since 2013. DCM bankers are confident Russian issuance will continue to fill the market throughout the fourth quarter, as Norilsk Nickel began a roadshow.

The European Central Bank’s (ECB) decision to introduce tiered deposit rates means that €800bn of cash held at the central bank will pay a higher interest rate than most covered bonds. This is not bad news for spreads — it just sounds like it is.

The astonishing rally in UK domestic equities in the past week as a Brexit deal with the EU started to look more likely showed how important an orderly exit from the bloc is to the market. If there is more progress towards a deal this week, the little loved sector could be primed for a resurgence in capital markets.

Investors pounced on the opportunity to buy a bond with a positive yield in the euro market by KfW on Tuesday. Elsewhere, the Asian Development Bank drew strong demand to sell its biggest ever green bond in euros following its debut in 2018.

The World Bank appointed banks on Tuesday to lead its first 10 year dollar benchmark in almost two years to join a flurry of SSAs who have recently ventured into this rarely visited part of the curve in the currency. Meanwhile, Finnvera has mandated banks for its second syndicated trade of the year.

Institutional investors from the US have been lending to German borrowers using the Namensschuldverschreibungen (NSV) — a non-callable registered instrument that is, unlike the Schuldschein, non-cancellable after 10 years. But some are sceptical of their involvement in the market, as they are of US lenders participating in the Schuldschein market.

The European Central Bank’s decision to introduce deposit tiering should have meant less demand for negative yielding covered bonds. However, there has been little evidence of sustained selling and bank analysts are optimistic that demand will hold up.

Argenta Spaarbank and Sumitomo Mitsui Financial Group were both marketing senior bonds on Tuesday, making use of the favourable backdrop in the primary market. While Sumitomo was quick to build demand for its bond, Argenta struggled to gather enough demand volume to move the spread from price thoughts.