Nordea Markets

Two renewable energy companies achieved successful euro bond issues on Thursday. Norsk Hydro, the Norwegian aluminium and renewable energy firm, and ERG, the Italian wind energy group, issuing in green format, both tightened their prices and finished with plenty of over-subscription in their books.

Public sector borrowers were able to achieve zero or negative new issue premiums and close books early in the euro market on Tuesday as investors piled into haven assets amid a weaker outlook for global growth.

Participants in the financial institutions bond market were bewildered to see Coventry Building Society paying up to issue a new additional tier one and tender for an old one this week. But the transaction gave other issuers a window into how European rules on bank capital may be applied in practice — something that could pave the way for new and more liberal approaches to calling and refinancing AT1s, writes Tyler Davies.

Recent supply of additional tier one capital bonds has confirmed to investors that reset spreads are not the only game in town for banks, when it comes to deciding whether to leave an instrument outstanding beyond a call date.

Nordea Asset Management’s European Covered Bond Opportunities fund has gotten off to a flying start, having been launched in February on the premise it would deliver twice the return of its low duration predecessor.

The Netherlands has targeted a window in May for its debut green bond, which will be sold through a Dutch Direct Auction.

Guarantor: Swedish local government members

A surge of additional tier one issuance this week shone a light on how activity in the market is going to shape up in the coming months and years — refinancing is now the main game in town.

Kommuninvest built out its Swedish krona green curve benchmark this week with its longest dated bond in the format. There is, however, an expectation that this Skr3.5bn ($382.3m) five year green bond could be the curve’s furthest extent.

Market participants expect that bank capital valuations will rally much further in 2019, with investors reverting to a hunt for yield amid the prospect of interest rates being lower for longer.

Bank of America, Goldman Sachs and Nordea launched a refinancing deal for specialty chemicals firm Perstorp Holding, a Swedish-headquartered PAI Partners and Landmark Partners portfolio company.

Nordea managed to raise €1.5bn of seven year funding at 4bp over mid-swaps on Monday — the tightest spread of any covered bond issued this year, other than in Germany. But subscription ratios for core covered bonds are falling and some key investors are lowering their orders.