Some signs of weakness are creeping into the euro corporate market after bellwether issuer BMW ended up tightening pricing by just 15bp for its €1bn dual-tranche offering on Wednesday. However, conditions are far from terrible and investors are still happy to put cash to work, with BMW and the day's two other issuers, Portuguese utility EDP and Austrian brick-maker Wienerberger, ending with solid, albeit unspectacular, demand. "Maybe there's a little bit of fatigue coming from the macro side, especially for cyclical issues, but the result [on BMW's trade] still slightly surprised me because I expected them to tighten at least 25bp, considering the small size and how it started 35bp–40bp back [of fair value] on a good day," said a syndicate banker. The banker, who was on the EDP trade, added BMW's guidance update slightly spooked the global coordinators on his trade. The German automobile manufacturer (A2/A, Moody's/S&P) tightened pricing by only 10bp at guidance when it gained combined books of €2.2bn. While it is hard to pin down one specific reason to explain the weaker-than-expected demand for a low-beta name with a rock-solid balance sheet, Europe's investigation into Chinese electric vehicle subsidies could have weighed on demand. "This raises some concerns for [original equipment manufacturers] with heavy exposure to China. Indeed, BMW has significant exposure to China, with 33.1% of mix coming from the region, and any action taken by the EU could result in some retaliation from Beijing, which could include the implementation of tariffs on imported vehicles," wrote CreditSights analysts. The analysts also pointed out how tight BMW bonds trade compared to Mercedes Benz at the longer-end of the curve, though they are broadly in line with diversified industrial names such as Siemens and Schneider Electric. BMW's €500m five and €500m 10-year bonds landed at mid-swaps plus 55bp and 90bp, inside 70bp area and 105bp area IPTs, respectively, via Barclays, BayernLB, HSBC, ING and Santander. Sources spotted fair value at around 35bp and 70bp. The October 2028s and 2033s gained final books of over €950m and €1.2bn. The bonds were issued through BMW Finance. Weaker risk tone EDP (Baa2/BBB/BBB) also had to pay double-digit new issue premiums to raise €1.35bn from a two-tranche green bond offering. Final terms for a €600m 5.5-year bond and a €750m 8.5-year note were set at 90bp and 115bp, inside IPTs in the areas of 110bp and 140bp, respectively. The company's existing green bonds pointed to a fair value at around 75bp and 95bp. Though the primary market saw a better risk sentiment on Wednesday, it had to wrestle with a broader risk-off tone at the start of the week with investors grappling with the prospect of higher interest rates for longer. "Moving into the last quarter and a more challenging outlook, at this point, investors and risk takers could be forgiven to stay at the sideline before calling the shots for their next move," said a syndicate head. Still, EDP's trade gained solid orders. Final books for the April 2029s and April 2032s were €1.15bn and €2.15bn, respectively. The bonds were priced through EDP Servicios Financieros Espana and EDP is the keep well provider. JP Morgan and UniCredit are global coordinators. They were also joint bookrunners with CaixaBank, CaixaBI, Citi, ICBC, ING, Mizuho, Natixis, SMBC, Standard Chartered and Wells Fargo Securities. ING was also the ESG structuring bank. Sub-benchmark sails through More cyclical and local name Wienerberger (Baa3, Moody's) managed to get a sub-benchmark issue done, raising €350m from its debut sustainability-linked five-year bond. The October 2028s launched at 185bp, inside 200bp area IPTs, on final orders of more than €650m. The deal was the only pre-announced trade emerging from the pipeline on Wednesday, but marketing made sense, given how the company is faced with a severe downturn in new
Bellwether