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◆ Friday Italian capital raising completed ahead of potential big issuance next week ◆ Strong market tone drives rise in AT1 bids ◆ Bank marches inside 300bp reset but also through recent Commerzbank spread
◆ Unusually busy Friday for European bank funding ◆ Small premium, large demand ◆ Meanwhile 10 year OAT-Bund spread breaches 100bp
◆ Larger-than-usual size ◆ Constructive Friday opening led to three well-received FIG trades ◆ ...of which Alpha may have paid the least NIP
Data
Conducive credit markets and tight spreads to lure issuers as risks loom on the horizon
Contrasting investor receptions in euro and sterling markets but new issue premiums rise in both
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
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Austrian lender Bawag took pride of place among four covered bonds issued on Wednesday with its ultra-long deal being the most subscribed and the first to close order books. The transaction drew more demand than a much larger and barely subscribed seven year from Royal Bank of Canada and brought in twice as many orders as other deals from SP Mortgage Bank and Aareal Bank. -
The fall in absolute yields to new record lows has heightened investors’ search for FIG bonds that offer an attractive pick-up. As a result, investors have favoured higher yielding senior non-preferred transactions from the eurozone periphery, ultra-long dated covered bonds and higher yielding central European and Asian covered bonds. By contrast, demand for lower yielding core European covered bonds, while still healthy, has begun to wane following the exuberant levels of demand witnessed in May.
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Associated British Ports defied sceptical observers this week and succeeded in persuading holders of a £65m floating rate note to switch its coupon to one set over Sonia — a global first. ABP managed to do it without paying investors a fee, potentially setting a precedent for others to follow. ABP is certainly likely to try again.
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An infrequent Swedish corporate issuer, a Nordic bank, and a German car manufacturer all placed floaters larger than Skr1bn ($106m) in the last week. Swedish krona bonds have been popular with both public and private issuers in recent weeks, as both issuers and investors rush to get business done before the traditional midsummer market closure.
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The suspension of the Woodford Equity Income Fund and the collapse of London Capital & Finance show how retail investors lack regulatory protection. This is strange, when a source of safer returns — bonds issued by large banks — is often deemed too complex and risky for the ordinary person to invest in.
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CaixaBank was able to attract orders of more than €3.85bn for the issuance of its seven year senior non preferred bond on Tuesday, more than three times the deal size.
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