Germany

The International Finance Corp returned to the Australian dollar bond market to fund its response to the coronavirus pandemic on Monday, while at the end of last week BNG capped the strongest month for SSA Kangaroo deals for over nine months.

KfW has made the first adjustment to its 2020 borrowing needs by doubling the size of its US commercial paper programme, with the Gerrman agency set to review its overall funding target at the end of June.

MEPs proposed a series of amendments to the Capital Requirements Regulation (CRR) this week, including a couple that could compel banks to stop paying additional tier one (AT1) coupons during the coronavirus pandemic.

France impressed as it received a record €51bn order book and paid a small new issue premium with its first syndication since the outbreak of the Covid-19 pandemic. The sovereign was joined in the long end of the curve this week by two sub-sovereign borrowers as investor appetite for duration grows, with more supply expected to follow.

Germany would be wise to consider diversifying its colossal funding needs with a syndication in dollars — a currency in which it is no stranger and which has become more attractive for euro-based funders, according to a head of public sector debt capital markets at one of the sovereign’s primary dealerships.

Commerzbank and Crédit Agricole this week showed that banks do not have to pay big premiums for subordinated paper, with investors regaining their appetite for risk during the coronavirus pandemic.

France received its biggest ever order book as it came to the market for a 20 year syndication on Tuesday. SSA bankers say that investors are looking for duration after previously sticking to defensive maturities as the Covid-19 crisis eases.

Infineon, the German manufacturer of semiconductors, has completed a €1bn capital raise to partially refinance its acquisition of Cypress Semiconductor Corporation. The deal demonstrated investor willingness to put capital to work in strategic equity raises that look beyond funding needs of the coronavirus crisis.

Deutsche Bank has become the latest big bank to announce a new sustainable finance target, with an eye-catching commitment to €200bn of financing between now and 2025 — but its policy highlights the difficulty for investors of comparing banks and deciding which are greener.

Dollars was the favoured currency for public sector borrowers for the second week running this week, giving attractive funding conditions for euro borrowers amid strong investor demand, particularly in the 10 year part of the curve.

Huhtamäki, the Finnish veteran of the Schuldschein market, is looking for a five year deal. Several bankers have said many other international issuers are coming as the market emerges from the first phase of the coronavirus pandemic, but they will find market norms have changed.

Unlike many banks, NordLB had been actively reducing its balance sheet well before the coronavirus crisis hit, so its need for funding is more modest than most. Though it seems likely Pfandbrief issuance will eventually return, German borrowers are hesitant to come to market, especially when there is cheap, plentiful central bank funding available. And, while Pfandbrief investors are well protected, it seems likely that a slow recovery in the commercial real estate market and a more questionable outlook for SME lending, will take its toll on lenders’ business models.