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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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A senior ETF manager at Invesco says it has become much harder for active funds to beat additional tier one indices, with the market having grown increasing homogenous in recent years. -
The lack of covered bond issuance this year and further European Central Bank buying has depleted dealer trading inventories, causing a short squeeze in bonds eligible for its purchase programme (CBPP3). This has diverted real money interest to higher yielding bonds and those that are not eligible for the programme.
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Deutsche Bank attracted more than €7.5bn of demand for two tranches of non-preferred senior debt on Monday, as investors showed strong support for the credit following a positive set of results for 2020.
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Caisse Française de Financement Local attracted strong demand for its 15 year covered bond on Monday, allowing the deal to be priced inside fair value. The strong outcome reflects the expected paucity of supply, giving issuers a compelling advantage, allowing them to “dictate deal terms”.
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Danske Bank slipped in ahead of a post-earnings supply rush on Monday to issue a new tier two note at flat to fair value. According to one banker, the deal showed that investors were still willing to take on risk even as spreads near record lows.
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JP Morgan paid a visit to the euro market for new senior funding at the start of the week, following recent examples set by Goldman Sachs and Morgan Stanley.
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Bond market's leading performers recognised at GlobalCapital's annual awards ceremony
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The winning institutions and individuals will be revealed at the awards dinner on June 17 in London
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