NordLB

The European Investment Bank and the State of Brandenburg have mandated banks to bring euro deals on Thursday, in what has been an extremely thin week for supply with issuers well funded and some weakness in secondaries.

Investors were eager to buy a euro benchmark seven year covered bond from NordLB Luxembourg on Wednesday, enabling the bonds to be priced flat to the issuer’s curve. That illustrating the strength of demand in what one lead manager described as a “hot” market.

Unlike many banks, NordLB had been actively reducing its balance sheet well before the coronavirus crisis hit, so its need for funding is more modest than most. Though it seems likely Pfandbrief issuance will eventually return, German borrowers are hesitant to come to market, especially when there is cheap, plentiful central bank funding available. And, while Pfandbrief investors are well protected, it seems likely that a slow recovery in the commercial real estate market and a more questionable outlook for SME lending, will take its toll on lenders’ business models.

Helaba has appointed two new syndicate bankers as it looks to bolster its coverage of FIG and SSA clients. The hires are among the first following a restructuring of the German bank’s capital markets business.

Two German states rebooted the primary SSA market on Tuesday with intraday deals at the opposite ends of the euro curve. The five year deal was almost two times covered but there were no book updates for the 15 year.

The Republic of Finland and the State of North Rhine Westphalia hired banks on Monday to prepare syndicated bonds at the long end of the euro curve. Yields of eurozone haven assets remain compressed while fears of the coronavirus outbreak intensify.

Nederlandse Waterschapsbank and the State of Brandenburg took advantage of a lack of euro SSA supply this week to bring well subscribed deals on Tuesday. The Asian Development Bank will be looking to follow with a 10 year euro benchmark on Wednesday.

The Federal State of Lower Saxony sold the first euro public sector benchmark of 2020 with a well received 10 year deal on Thursday. Meanwhile, the European Investment Bank is keeping to tradition of beginning its benchmark funding for the year in sterling.

Covered bonds performed well in 2019, but yields finished in negative territory and spreads ended at their tightest for the year. The implication is that, despite higher than expected ECB covered bond purchases and a renewal of its ultra-cheap TLTRO facility, investors will struggle to match 2019’s returns in 2020, writes Bill Thornhill.

The European Commission will allow a group of public institutions in Germany to inject €2.8bn of capital into the troubled German lender NordLB, after finding that its recapitalisation plans conformed to EU rules on state aid.

Corporate bond investors in Europe have enjoyed an “exceptional” year, according to analysts at one bank, with significant spread tightening in all sectors, even though negative yields have become increasingly common again.

Intesa Sanpaolo and BNP Paribas hurried to make use of strong market conditions this week, building blowout order books for a pair of new senior deals in socially responsible formats.