(Adds detail, further comment, deal priced)
The Republic of Finland (Aaa/AA+/AAA) on Tuesday priced a new €3bn 0.875% 10-year bond in an improving euro primary market and at a time when many investors were looking to flee volatile equity markets and park their cash in safer places.
However, an unenthusiastic response to the deal has left some observers wondering what the implications for the primary market in euro would be, particularly given that several issuers were considering issuing benchmark bonds in the single currency.
Despite offering a decent new issue concession of between 4bp and 6bp, Finland fell short of generating €3bn of demand, and had to lean on the lead managers to get over the line.
The order book closed in excess of €3.65bn, including €750m of joint lead manager interest.
“I have to say that’s not really convincing at all, especially when we were all expecting a flight-to-quality bid,” said one SSA banker away from the deal.
“Based on this, maybe there isn’t as clear a window for euro issuance as we thought,” she said, a view echoed by two other bankers.
A lead banker conceded that this assessment was accurate for longer-dated euro bonds.
“They are correct for the longer end; 10-year and longer. But I think the combination of higher yields and higher volatility means there should be opportunities for other Triple A rated issuers such as EIB and KfW in shorter maturities, were they to look at them,” he said.
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The Republic of Finland has set a maximum size of €3bn on a new 10-year bond, and has started marketing the trade at high single digits below mid-swaps.
The sovereign, rated Aaa/AA+/AAA, earlier on Tuesday picked BNP Paribas, Danske Bank, JP Morgan, Nomura and RBS to lead manage the September 2025 trade. The transaction is expected to price later on Tuesday.
