North America

Covered bond investors have begun to return, primary market spreads have tentatively started to tighten and new issue concessions are coming down — which theoretically bodes well for a broadening of supply. But bankers, battered by the stresses of the last month, remain cautious.

As investors single out Mexico’s response to Covid-19 as one of the least convincing in Latin America, Fitch threw government-owned oil company Pemex and its $80bn of bonds deeper into sub-investment grade territory on Friday.

Toronto-Dominion Bank launched the first Australian dollar covered bond of the year on Thursday night, issuing in good size at a similar spread to where it recently issued its dollar covered bond.

EM bond bankers were feeling relieved after a better day for global markets on Thursday, as they said some of the asset class’s best issuers were lining up deals hoping to clinch much-needed funding.

T-Mobile became the latest US company to cash in on the extraordinary boom in dollar bond issuance as it priced an increased $19bn deal on Thursday that attracted $72bn of demand.

Guarantor: CPP Investment Board

The euro public sector bond market has been fired up, with all tiers of issuers in the market. But it is not the same picture for every SSA, with borrowers eligible for the European Central Bank’s asset purchase programme getting a far brighter reception than those not.

Lloyds Banking Group became the first Yankee bank to access dollar funding for almost a month when it came to the market with a new senior deal on Thursday.

European banks broke a five year record for funding volumes in the first quarter, despite steering clear of markets for most of March. Their blistering start to the year will help them to sit out a while longer, as they wait for funding costs to settle during the coronavirus pandemic.

Having dropped off in early March, Swiss franc issuance has bounced back in the last fortnight, buoyed by returning investors flocking to low investment-grade rated borrowers, like triple-B rated cement manufacturer LafargeHolcim, and piling into a record-breaking foreign covered bond.

CPPIB Capital and L-Bank found strong demand for two year dollar deals on Thursday as central banks seek haven assets with chunky spreads to US Treasuries. For L-Bank, it also brought a sense of redemption after it had to pull a deal two weeks ago in the same currency and maturity following a lack of demand.

Dollar high yield buyers showed up in force for the largest priming debt opportunity provided so far by the coronavirus crisis, Carnival Corporation’s $4bn rescue offering, priced alongside a convertible and an equity capital raising on Wednesday. The package provides funds for the stricken cruise operator until November, but even if the company can’t start sailing again this year or next, investors in the new issue are first in line for the firm’s $38bn of assets.