North America

SSA borrowers shrugged off a hiccup by the Province of Ontario this week to issue a series of strongly supported benchmark euro deals.

Futures markets are discounting the likelihood of a rate hike by the US Federal Reserve despite Chair Janet Yellen’s guidance, with traders playing wait-and-see along the yield curve.

SumitG, a triple recourse programme sponsored and guaranteed by Goldman Sachs Group and Sumitomo Mitsui Trust Bank, will be backed at first entirely by senior tranches of European and Japanese RMBS. Over half of the collateral will be rated triple A, and none of the bonds are below A minus. Despite this the deal gets no rating benefit from the collateral pool.

In the lead up to the commencement of trading for short-term VIX options on Thursday, brokers and traders are scouring for signs of market appetite for the new contracts.

Royal Bank of Canada priced one of the largest dollar covered bonds on Wednesday and despite pricing at the widest spread this year, the deal achieved better execution than was available in senior unsecured or euro covered bonds. It also showed the limitations of an illiquid secondary market for price discovery purposes, but with the real clearing level now set, others should follow.

Size is still coming at a price for SSA borrowers, with European Investment Bank paying a slightly elevated new issue premium for a $4bn five year on Tuesday. Despite this, bankers said a second trade from Erste Abwicklungsanstalt confirmed the market is in robust health.

Confidence that the market has found the clearing level for euro benchmarks from all public sector borrowers in the world of eurozone quantitative easing is premature. A pulled deal by the Province of Ontario shows the need for price discovery.

Royal Bank of Canada has mandated leads for a dollar benchmark covered bond that is likely to price at a substantially wider spread than previous similar deals.

With macro factors causing investors to expect the US Federal Reserve to delay rate hikes, the looming earnings announcement cycle has come into focus for volatility traders.

Low yields may have resulted in the first SSA fatality of the year after the Province of Ontario was forced to pull a 10 year euro benchmark on Monday. But some bankers suggested the issuer was simply unlucky.

After a year of solid performance, a spike in volatility across multiple asset classes helped some derivatives fund managers to put in a strong performance last month.

Hewlett-Packard ensured a memorable end to the third quarter as it printed one of the biggest deals of the year but paid a hefty new issue concession as it re-opened the dollar market after a tumultuous start to the week.