Tuesday, 18 September 2018

Issuers stay away, but not for long

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The year’s highest weekly volume of covered bonds has given way to a quiet Monday, but bankers expect activity to pick up imminently.

Nine issuers printed a combined €7.25bn in new covered paper last week, alongside €4bn in senior bonds and €1bn in subordinated capital. The credit indices opened wider on Monday, prompting borrowers to choose to stay away from the primary market. At 10am, the Main was over 1bp wider at 63.27bp, the Senior Financials was 2.3bp wider at 73.15bp and the Sub Financials was almost 4bp wider at 149bp.

Even so, bankers and analysts alike are confident that more covered supply will follow this week. Several peripheral names have been touted as they emerge from blackout periods. Bankia, for example, reported results on Monday.    

The market for peripheral issuers reopened last week, courtesy of Banca Popolare dell’Emilia Romagna, Bankinter and Banco Popular Espanol. The majority of last week’s deals were flattish to a touch tighter this morning, although the latter is almost 5bp tighter than its pricing level of swaps plus 37bp.

But issuers that can issue either covered or senior paper could opt for the latter, according to one syndicate banker. “If you can do both, you’d probably rather do senior and keep a covered deal for times of greater volatility,” he said.

One issuer that looks likely to offer a senior deal is bad bank KA Finanz, which manages the securities of failed Austrian bank Kommunalkredit Austria.

It announced a roadshow for a government-guaranteed bond the week before last and issued indicative pricing comparables last Wednesday, including the Austrian government, Unedic and CCCIF. Feedback then pointed towards three and/or five-year tenors.  Barclays, Deutsche Bank, Erste, Natixis, RBI are leading the trade.

Sainsbury’s Bank, meanwhile, may revive the sterling Tier 2 market this week, having mandated HSBC, JP Morgan and UBS for an inaugural 10-year non-call five-year bond the week before last. It was said to be collating feedback on Monday.

Sainsbury plc printed a £250m perp NC5 hybrid deal at 6.5% last Thursday. That bond was bid at 6.145% on Monday morning. 


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