LBBW

LBBW issued a well subscribed €650m nine year public sector loan-backed Pfandbrief on Monday at a relatively tight new issue concession compared with many recent negative yielding covered bonds.

Volumes in other syndicated loan markets may be down, but bankers in the Schuldschein market have rather more to crow about. Derided though it may be for being antique and parochial, it has nonetheless managed to attract an impressive number of debut entrants this year and is set to break the record volumes of 2017.

Credit Suisse was marketing a 10 year bullet senior bond on Tuesday, avoiding negative yields by choosing a tenor longer than seven years. At the same time, Sparebank 1 announced it was readying its green debut in senior format.

Deutsche Pfandbriefbank was marketing a five year senior preferred bond in the euro market on Thursday. The deal was launched at a spread unmoved from price thoughts, with order books only €125m larger than the deal size.

German healthcare company Fresenius has launched a Schuldschein across three tenors.

With no major new issues in sight, the high yield bond market has been dominated by the news of troubled businesses struggling to come up with credible turnaround plans.

ZF Friedrichshafen is targeting the end of August to launch its grand return to the Schuldschein market, according to people with knowledge of the situation. The German car parts maker’s €2.2bn issue in November 2014 is the biggest deal the market has ever seen but a bigger deal may be on the way.

German housing company Gewobag has closed a Schuldschein in the next few days with well over €1bn of orders, in a transaction that could be the largest of this year so far.

Issuers and investors are rapidly coming to terms with the idea that negative yields will become a permanent feature of the financial institutions bond market. Debt capital markets officials say that it is now only a matter of time before a bank plucks up the courage to sell a new senior bond with a sub-zero yield, following examples set in the covered bond market.

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Schleswig-Holstein stretched its euro curve out by a decade on Wednesday, as market participants warn that the world of positive yielding German sub-sovereign debt is shrinking.

Green Schuldscheine have been a peripheral feature of the market for the past three years but this seems to be changing, with a billion plus transaction from Porsche and a sustainability linked note from Durr stirring investors into a frenzy. This green turn could have more of an impact for short term market growth than the odd non-European borrower tapping the market.