Germany

Market participants will be reassessing the role of deposit guarantee schemes in European Union bank bailouts after this week’s ruling by the European Court of Justice that the 2014 rescue of Banca Tercas should have been upheld as lawful.

Austrian paper and packaging company Mayr-Melnhof Karton has sold €1bn of long-dated Schuldscheine, in the first transaction of that size this year. The deal, which will fund acquisitions in Finland and Poland, showcases the high amounts and attractive structures companies can achieve due to a supply and demand imbalance in the German private placement market.

KfW rebooted the short end of the euro public sector bond market on Tuesday with a well subscribed trade which offered a modest new issue premium. The deal shared the euro SSA market with the State of Baden-Württemberg’s debut green bond.

Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Monday, March 1. The source for secondary trading levels is ICE Data Services.

HVB, the Germany subsidiary of UniCredit, attracted more demand for its €750m 10 year than any Pfandbrief of that size launched in over a decade.

Four public sector borrowers announced new deals in the primary market on Monday ahead of the European Union’s much anticipated second transaction from its Support to mitigate Unemployment Risks in an Emergency programme this year, which is expected to arrive later in the week.

UniCredit’s German subsidiary, HVB, is expected to open order books for a 10 year benchmark on Tuesday. With swap yields currently just positive, the deal has a slim chance of offering a positive return.

European banks have been busy in the credit markets in 2021, despite fears that rising deposits and cheap central bank money would eat away at issuance volumes. Sales have been boosted by a sharper focus on senior debt and a pivot towards dollar transactions.

The European Commission has opened a public consultation as part of its review of the EU’s crisis management framework, as market participants call for more urgent political progress on key areas.

The rise in US Treasury yields has begun to sour. While at first it was hailed as an indication that investors were anticipating rapid economic recovery and stimulus-borne inflation, it seems now to have outstripped inflation expectations. The sell-off shows little sign of slowing, and if the volatility does not abate, primary markets could begin to suffer.

Guarantor: Federal Republic of Germany

Schuldschein agents have begun offering borrowers delayed draws in a bid to increase the product's value as a funding option. Many investors are wary of the prospect of deferred funding but are also desperate for supply.