Germany

Volkswagen’s real estate arm has been forced to change the terms of its Schuldschein, after investors failed to flock to the deal. A borrower issuing a second round of terms or price guidance is rare in the Schuldschein market, but this happened to Telefonica Deutschland in January.

Commerzbank reset the pricing of its covered bond curve to a more realistic market clearing level with its €500m 10 year on Monday, as Erste Group, HSBC, Axa Bank and mBank Hipoteczny announced deals.

UK ticket printing company Paragon Group returned to the euro private placement (PP) market on Monday, becoming the first non-French issuer to raise Euro PP notes this year.

BMW sold one of the first two trades in the euro corporate bond market in 2018. It took until April to follow that with a five-tranche offering in the dollar market. It waited less than the week then to make its first visit to the sterling market, but found sterling investors in a similarly stubborn mood to that of euro investors.

North American private placement (PP) lenders are being routinely chosen over UK investors by borrowers in sterling, as a consequence of increasing advantages won through cross currency swaps, US PP participants have said.

Volkswagen Financial Services had been conspicuous by its absence in the euro corporate bond market in the first quarter of 2018. Having been the largest corporate issuer by volume in 2017, the company had used other markets so far this year before selling a new triple tranche deal.

Volkswagen Financial Services had been conspicuous by its absence in the euro corporate bond market in the first quarter of 2018. Having been the largest corporate issuer by volume in 2017, the company had used other markets so far this year before selling a new triple tranche deal.

Deutsche Pfandbriefbank is lining up to issue its first additional tier one bond, which would give primary market investors their first chance to gain AT1 exposure to a German bank in close to three years.

Euro PP market players are growing confident that widening spreads and growing volatility in the unrated and high yield public bond markets will drive an increase in the average deal size in their market in the coming six months.

Sterling seemed to be the only game in town this week. Two SSA issuers printed in the currency on Wednesday, taking advantage of a favourable basis swap.

Schuldschein market participants expect an uninspiring pipeline for the next few months as the hangover of 2017's pre-funding spree is felt in the first half of this year. But traditional arrangers hope the itch to win mandates is satisfied by a search for borrowers from new regions, and not a scurry down the credit spectrum.

Private placement investors have noted a widening in secondary market spreads for the bonds of UK utilities. That means they may be able to price private placements for these borrowers within their outstanding sterling bond curves, depending on maturity, which has not been easy in the last few years.