Germany
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SSAs enjoyed a fine week in the sterling market, raising a total of nearly £2bn as bankers pointed to several factors that could be driving demand. -
The euro market has, after a wobble in the first week, adjusted admirably to a new price level and got off to a spectacular start, providing record book sizes and smooth executions across the curve.
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Public sector borrowers are finding funding conditions beyond their wildest dreams, with not just last year’s staples of dollars, euros, sterling and Australian dollars on offer across the curve but the Canadian and New Zealand currencies coming into play too.
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A trio of 10 year covered bond deals issued this week showed that interest in this tenor is less uncertain than initially feared. But, in a rising yield environment, investors are likely to become more defensive and this demand risks being short-lived.
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Bayer took advantage of the robust conditions in Europe’s market for equity block trades on Wednesday night with another jumbo sale of stock in Covestro, the former plastics division it span off in 2015.
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German supermarket group REWE International has become the first company to launch a Schuldschein deal at benchmark size this year, a sign that German blue chips may be busy in the market this year.
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Vonovia, Germany’s largest housing association, may have issued the only investment grade corporate bond on Monday but, as its order books showed, conditions remained very receptive for issuance.
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French toll road operator Autoroutes du Sud de la France on Wednesday followed the path its compatriot Orange had taken on Tuesday by issuing a €1bn 12 year bond, while Deutsche Bahn and Ren Finance on Thursday opted for the 10 year area of the curve. Investors appear keen to put their money to work at the longer end of the corporate bond curve.
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Multi-tranche and green bond issuance returned to the investment grade corporate bond market on Tuesday, leaving just the hybrid asset class untouched in 2018. That didn’t last long, as Engie and Aroundtown launched new hybrid deals on Wednesday morning, one of which set new lows for coupons and spreads.
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Public sector issuers rounded out a superlative week for dollars with sparkling results across the curve on Thursday. Bankers are confident that issuers wishing to print in the coming weeks should find that investor demand outweighs any of the political concerns that brought volatility to rates over the last few days.
