Spain
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BBVA is expected to take advantage of recent changes to Pillar 2 requirements with a greater proportion of senior preferred issuance but it has a modest need for subordinated issuance. The Spanish national champion also plans to make use of its Targeted Longer-Term Refinancing Operation (TLTRO) allotment from the ECB, which has been substantially increased. -
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Market participants expect European banks to take a large chunk of funding through the European Central Bank’s Targeted Longer-Term Refinancing Operations (TLTRO III) programme, hitting covered bond supply levels. But issuance in other asset classes should remain unaffected as banks follow through with their funding plans.
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There were no issues of competing supply on Tuesday as three eurozone sovereigns amassed big order books, buoyed by last week’s expansion of the Pandemic Emergency Purchase Programme (Pepp).
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Spain and SNCF SA announced new euro benchmarks with 20 year maturities on Monday, following the European Investment Bank’s record-breaking effort in the tenor last Friday.
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After the global eruption of the coronavirus pandemic, issuers such as governments, central banks and companies have been prompted to create new strategies to tackle the negative effects. Banks have also recently begun issuing labelled bonds linked ot their Covid responses.
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The Spanish treasury has invited investors to join a call on Friday to discuss the sovereign’s recently updated funding programme for the year.
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Mitsubishi UFJ Financial Group (MUFG) has become the second bank to issue a Covid-19 bond in the euro market following the example set by BBVA in May.
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Spanish house prices fell for the first time in four years in the first quarter this year, but even so, the Cédulas market is in a much stronger position to weather further expected falls than it was when house prices dove in 2007 and 2012. And based on the recent performance, even if spreads were to widen, some investors would be likely to consider the move as an opportunity to buy.
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Iberdrola attracted robust demand for a €249m tap of its outstanding equity neutral convertible bonds due in 2022.
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BBVA surprised market participants by becoming the first bank to issue a Covid-19 response bond in Europe this week. There will be follow-on deals as the format catches on in credit markets — high grade corporates are looking to do deals too — but it is unlikely to be exploited as widely as it has been in the SSA market. David Freitas and Mike Turner report.
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