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◆ Receptive but crowded FIG market requires concessions for funding to clear ◆ BBVA goes big with its first SP in more than two years ◆ Bawag issues first bond after PTSB acquisition
Bank issuance ranges from strategic tier one capital to insurance subsidiary funding externalisation and big senior bond offerings
◆ Issuer's joint-tightest spread since 2020 ◆ Constructive backdrop helped execution, says lead ◆ Busy primary market expected on Tuesday
◆ Deal benefits from limited size, green label and short tenor, says lead ◆ Small NIP paid ◆ BPER involved in complex Italian M&A
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Analysts this week said the return of government guarantees in Germany in the form of SoFFin II could favour senior unsecured issuance and lead to the asset class crowding out Pfandbriefe. The performance of non-guaranteed Pfandbriefe could suffer, they said, although they added that the extent of that prospective underperformance was likely to be a function of the spread of new guaranteed deals, along with the amount of guaranteed debt issued.
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With the first offering set for this Wednesday, bankers are disputing the likely effect of the ECB’s new long term refinancing operations. While some doubt that cheap funding of sovereign debt carry trades will prove a "back door bazooka", as some FIG bankers are calling it, others see it increasing demand for senior FIG debt.
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Bankers on Thursday disagreed over the potential effects of the ECB’s three year long term refinancing operation (LTRO) announced last week. While some analysts suggested the idea of banks using ECB funding for profitable sovereign debt carry trades was not the “back door bazooka” many made it out to be, others said such a strategy could increase primary demand for senior FIG debt.
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Bankers on Wednesday expressed concern at widening senior CDS and cash spreads, saying high funding costs could freeze second tier issuers out of the market and even make life difficult for the very top names.
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While secondary market levels widened for most European banks between November and December, Spanish banks tightened by between 70bp and 80bp — BBVA and Santander’s five year paper was at around 390bp over swaps on Tuesday.
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Bankers on Monday said widening in CDS and drops in equities had so far failed to create a noticeable effect on the senior cash market, although they added that trading volumes were minimal.