Higher-yielding bank bond deals 'are flying'

A strong response to a new issue from UniCredit Bank Austria highlighted the demand for bonds boasting attractive yields

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UniCredit Bank Austria gathered over 1.6 billion euro ($2.8 billion) of orders for its five-year bond issue. Lead managers BayernLB, BNP Paribas, Danske Bank, DZ Bank and UniCredit closed the book late on Wednesday morning for the 500 million euro no-grow deal. They were set to price it at 163 basis points over mid-swaps.

The bond is a debut for the borrower in the senior unsecured market. It had tried to issue a deal in October — lead managers even opened books for a five year at 150bp over mid-swaps — but ultimately stepped back from the market. Since then, the bank has met investors, and saw an opportunity to take advantage of a strong market on Wednesday.

The same day, lead managers Banca IMI, Deutsche Bank and Natixis raised a 600 million euro book for a 2.5 year bond issue from Veneto Banca. The deal was set to be priced at a yield of 4.125%, the tight end of 4.125% to 4.25% price guidance.

That offered a fair pick-up to higher rated Italian names who have issued recently, a rival banker told EuroWeek Bank Finance. Banca Popolare di Milano sold a 750 million euro, three-year bond at 360bp over mid-swaps last week.

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That had tightened to trade in the low 300bp area on Wednesday. Similarly, the 1.25 billion euro three year that Banco Popolare sold on Monday at 310bp over swaps had tightened to around 300bp, the banker said.

Demand for the borrowers showed the interest investors have in higher yielding bond issues, another rival banker said.

“These deals are flying,” he said. “They’re going very well. Everything else doesn’t get people excited. A lot of the easy value has come out [of the lower beta names].”

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