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Contrasting investor receptions in euro and sterling markets but new issue premiums rise in both
Bankers predict steady flow of covered bonds issuance over coming weeks despite recent spike in activity
The conditions are in place for the return of big-ticket M&A to create a European banking champion that is sorely needed — provided the politics of it don’t get in the way
Data
Observers blame slower bookbuilding on deal-specific factors but others see warning shots for whole market
Covered market provides 'the deepest pocket of demand' among FIG asset classes
Capital deals and a tight Nordic senior print point to what lies ahead for issuers
The single currency stands out as the most attractive funding source while the US dollar market remains open in size
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The European Central Bank could give EU lenders more time to rebuild their capital buffers if they struggle to keep on top of an expected increase in credit risk during the coronavirus pandemic. -
Covered bonds and RMBS secured on green mortgage collateral do not deliver issuers much of a saving over conventional issuance in those markets, but favourable regulatory initiatives stand to tip the balance towards an increase in green mortgage production. Secured issuance will be the best way to fund this activity — expect green RMBS and covered bond issuance to surge.
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The volatility that defined the first week of March for SSA issuers meant the paid higher new issue premiums than before — an average NIP of 1.5bp. But the same metric fell to 0.71bp last week, suggesting growing investor comfort that will have been buoyed by the ECB’s decision last week to step up its Pandemic Emergency Purchase Programme to meet rising government bond yields — and even those numbers were well below last year’s average SSA NIP of 2.6bp.
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Berlin Hyp’s six year green Pfandbrief and Bawag’s 20 year vanilla covered bond attracted strong demand on Tuesday reflecting the paucity of supply, a steadier rates outlook, the rare tenors on offer and, in Berlin Hyp’s case, the green collateral. At the same time VUB mandated leads for a five year covered bond, the first from Slovakia this year.
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Crédit Agricole has appointed Christian Haller to head up its debt capital markets operation in Germany and Austria.
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There has been no let up in the pace of euro issuance from banks this week, with BBVA and Hypo Noe diving into another full market on Tuesday following a busy but 'comfortable' session on Monday.
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