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People & Markets

MUFG agrees to sale of MUFG Union Bank

Mitsubishi UFJ Financial Group has agreed to sell MUFG Union Bank, the mega-bank's US retail and commercial banking franchise, to US Bancorp. MUFG will receive US$5.5bn in cash and US$2.5bn in shares of US Bancorp, giving it a 2.9% stake, and the two will consider forming a business alliance. MUFG will also receive US$9.6bn from expected dividends or share purchases by MUFG Union Bank before the shares are transferred, bringing the total value of the transaction to US$17.6bn. MUFG Union Bank's global commercial and investment banking and global markets businesses are not included in the sale, and will be transferred to MUFG Bank's US branches. "The importance that MUFG places on the US market remains unchanged, and MUFG will continue to pursue growth strategies and streamline operations and systems in the US by focusing management resources on our wholesale corporate and investment banking franchise through alliances among the bank, the trust bank and the securities firm under MUFG, as well as the strategic alliance with Morgan Stanley," said MUFG in a statement. The transaction is expected to close in the first half of 2022. MUFG said its common equity Tier 1 ratio is expected to improve by 45bp following the transaction, including a 50bp gain from the reduction in risk-weighted assets. "We see the sale as a highly positive step for MUFG, as it had struggled to make a positive return from its investment in MUFG Union Bank," wrote CreditSights, noting that the US business had taken large loan loss reserves in the year ended March 2021 and was much less profitable than other US regional banks.

P&M
Quick read
Americas, Asia
Daniel Stanton

Equities

India's Freshworks prices Nasdaq IPO above revised range

Indian enterprise software company Freshworks has raised US$1.03bn after pricing its Nasdaq IPO at US$36 per share, above the revised guidance of US$32–$34. The company launched the IPO in the US$28–$32 range. Trading in the shares starts tonight. Up to 28.5m shares, or 10% of the capital, were on offer. There is a greenshoe option of 2.85m shares. Freshworks is backed by Accel Partners, Tiger Global and Sequoia Capital. The San Mateo-based but India-founded and substantively India-based company is a rival of Salesforce.com and Zendesk and legacy players such as Oracle and SAP. The deal is the largest listing of a software services company from India on any market. MakeMyTrip was the last Indian internet company to list in the US, through a US$70m IPO in 2010. Azure Power Global was the last Indian company to complete a US IPO, in 2015. Freshworks, founded in 2010, reported revenue of US$168.9m for the six months ended June 30, up 53% from US$110.5m in the same period last year. Its net loss narrowed 83% to US$9.8m from US$57m during the same period. CEO Girish Mathrubootham is the founder of the company. Morgan Stanley, JP Morgan and Bank of America are the lead bookrunners.

EQY
Quick read
Asia
S Anuradha

BON RATE

BoJ keeps policy steady, outlines lending scheme to fight climate change

The Bank of Japan on Wednesday kept its policy rates unchanged and announced the details of its lending scheme to combat climate change. The Japanese central bank left its short-term policy rate and 10-year yield target steady at -0.10% and around zero, respectively, as expected. The decision was made by an 8–1 vote. The dissenter was policy board member Goushi Kataoka, who said both policy rates should be lowered to support capital expenditure. The central bank left its asset purchase programme unchanged. It said it will buy commercial paper and corporate bonds with an upper limit on the amount outstanding of ¥20trn (US$183bn) until end-March. It will also buy ETFs and J-REITs so that its respective holdings will increase annually by up to ¥12trn and ¥180bn, respectively. The Bank also decided on details of a new lending scheme for loans or bond investments related to battling climate change. Under the new scheme, called "Climate Response Financing Operation", it will lend one-year funds at zero percent to financial institutions, but the financial institutions need to disclose information on four thematic areas in the recommendations of Japan's Task Force on Climate-Related Financial Disclosures and on targets and actual results for their investments or loans. It will conduct the first lending operation in late December and will continue to do so twice a year through end-March 2031. On the economic outlook, it basically maintained its existing language. It said Japan's economic activity for the time being is expected to be lower than it was prior to the pandemic, mainly in the face-to-face services sector. But it hopes that, as the impact of the Covid-19 wanes, the Japanese economy is likely to recover because of progress with vaccinations, external demand, accommodative financial conditions and the government's measures. JGBs have shown no visible reaction to the BoJ decisions. As of this writing, futures trade at 151.85, the same as the midday level.

BON RATE
2 min read
Global
Takahiro Okamoto

BON RATE

BoJ keeps policy steady, outlines lending scheme to fight climate change

The Bank of Japan on Wednesday kept its policy rates unchanged and announced the details of its lending scheme to combat climate change. The Japanese central bank left its short-term policy rate and 10-year yield target steady at -0.10% and around zero, respectively, as expected. The decision was made by an 8–1 vote. The dissenter was policy board member Goushi Kataoka, who said both policy rates should be lowered to support capital expenditure. The central bank left its asset purchase programme unchanged. It said it will buy commercial paper and corporate bonds with an upper limit on the amount outstanding of ¥20trn (US$183bn) until end-March. It will also buy ETFs and J-REITs so that its respective holdings will increase annually by up to ¥12trn and ¥180bn, respectively. The Bank also decided on details of a new lending scheme for loans or bond investments related to battling climate change. Under the new scheme, called "Climate Response Financing Operation", it will lend one-year funds at zero percent to financial institutions, but the financial institutions need to disclose information on four thematic areas in the recommendations of Japan's Task Force on Climate-Related Financial Disclosures and on targets and actual results for their investments or loans. It will conduct the first lending operation in late December and will continue to do so twice a year through end-March 2031. On the economic outlook, it basically maintained its existing language. It said Japan's economic activity for the time being is expected to be lower than it was prior to the pandemic, mainly in the face-to-face services sector. But it hopes that, as the impact of the Covid-19 wanes, the Japanese economy is likely to recover because of progress with vaccinations, external demand, accommodative financial conditions and the government's measures. JGBs have shown no visible reaction to the BoJ decisions. As of this writing, futures trade at 151.85, the same as the midday level.

BON RATE
2 min read
Global
Takahiro Okamoto

BON RATE

UK DMO debut breaks demand and greenium records

The UK DMO moved the goalposts on Tuesday for green issuance as it received a rousing response for a debut green Gilt that broke records for size, demand and pricing in the asset class. Leads Barclays, BNP Paribas, Citigroup, Deutsche Bank, HSBC and JP Morgan opened books on Tuesday morning with guidance for the 0.875% July 2033 benchmark at 7.5bp–8.5bp over the 4.25% June 2032 Gilt. In typical DMO style, the spread was set at plus 7.5bp a mere 30 minutes later. It went on to launch at £10bn size with final demand at more than £100bn, including £10bn of joint lead manager interest. "This is not only a record book for a UK DMO syndication by some considerable margin but it's also the largest-ever green order book and shows the huge appetite for green sterling assets," said Asif Sherani, managing director, head of DCM syndicate EMEA at HSBC. "At £10bn, it's the largest-ever sovereign green bond, and while the UK could have printed considerably more, they were limited in terms of size. The ESG angle added demand, both from an international and domestic perspective." The order book beat Italy's green debut in March when demand was more than €80bn. The deal also eclipsed the UK DMO's own record – the £82.6bn book for last year's £12bn October 2030s. "The deal size came in at the upper end of expectations at £10bn. Taking into account the huge demand, the slim allocations (relative to a brown Gilt syndication), we expect this Gilt to perform well in the coming days and months," said Matthew Amis, investment director at ASI. "This will be aided by no further issuance of this 10-year green Gilt until Q1." The trade also set a new high mark for the greenium. At 7.5bp over the June 2032 Gilt, Sherani said the issuer had achieved a 2.5bp greenium based on an interpolation of where the UK's on-the-run 2031 and 2035 bonds are trading. "One of the previous stumbling blocks is that we wanted to be sure as much as we could be that we could achieve value for money for the UK taxpayer," said Robert Stheeman, chief executive of the UK Debt Management Office. "We feel that we have been able to achieve that in a very clear and unambiguous manner with this deal. At around 2.5bp, this is the largest-ever greenium by any sovereign for an inaugural offering." It beat Germany's debut green bond last year, the first trade to clearly demonstrate the pricing advantage of green instruments versus conventional paper and the 2bp greenium the country achieved on a 30-year syndication earlier this year. "They've got a huge reaction," another banker said. "We all hoped for this but you can never expect it; there is a distinct greenium here, the biggest we've ever seen." "We congratulate the Debt Management Office on the successful introduction of a green Gilt into the UK Gilt market and expect future issuance of green Gilts as the UK looks to expand the scope of maturities available to investors seeking greener investments," Amis said. Stheeman said that while the size of the book gave an indication of the significant demand and momentum behind the transaction, the true mark of the deal's success was the diversity in orders. "There were genuine new investors who had previously not appeared in a Gilt order book. We genuinely didn't set out to do a £10bn trade but under the circumstances felt this was appropriate." Playing catch-up The transaction has emerged just a few weeks ahead of the UN’s COP26 climate meeting, which is being held in Glasgow in November. Despite its ambitions to be a green leader, the UK has lagged as only the 11th biggest jurisdiction for green issuance globally, with US$9.84bn in total printed out of the country in 2021, excluding supranationals. Although that is double the US$4.84bn printed in 2020, it is far behind China with US$54.23bn year-to-date, the US with US$45.44bn, and Germany at US$44bn. Sherani said the trade was a game-changer for the UK green bond mark

BON RATE
6 min read
EMEA
Helene Durand

Bonds

Another record topples as Rentenbank books pass EUR5.2bn

The euro public sector bond market witnessed another record on Tuesday after books for Rentenbank's €1.5bn five-year transaction closed over €5.2bn, the biggest yet for the Germany agency. The EIB and KfW both beat order book records last week despite coming on the same day while a €5bn 15-year for Austria also garnered a record demand. "This is a record book for Rentenbank," a lead said. "There continues to be a lot of cash in the system, even though we have things like the Evergrande news which I would say is pretty big. But it feels like the market is insulated, anaesthetised, at least for now. It doesn't feel like we've had much of a break versus last week when everything worked, whether it was 5s, 10s, 15s, 30-year. Books were at record levels and it looks like Rentenbank will be a record." Rentenbank's trades can be hit-and-miss. A €500m December 2028 print sold in early September was only just subscribed with books passing €560m though that included €75m of lead interest. However, Tuesday's benchmark via Barclays, Deutsche Bank, Morgan Stanley and UniCredit that started as a €1bn minimum issue saw books grow exponentially. "If you look in that part of the curve, these agencies still offer a very healthy pick-up versus core and semi-core EGBs," a banker away from the deal said. "The EGB curves are steeper than agencies and SSAs in general so in five-year, you get something like 7bp-8bp pick-up over sovereigns whereas in 10-year, you're basically through France. Also, we've seen good performance in secondary from the likes of the EU or KfW that have tightened 2bp-3bp." The leads started marketing the Rentenbank deal at 10bp area through mid-swaps. Fair value for the deal was estimated at less 13bp based on the less 15bp at which EIB priced its €3bn deal in the same tenor last week. Another banker away said he thought the starting point had looked cheap. "They usually tend to start tighter and sometimes that works for them, sometimes it doesn't," he said. "But if you look at the end result, it was not too cheap."Mindful approach While demand has been abundant, issuers have had to be mindful of marketing levels and approach the market with reasonable premiums. A €1bn seven-year for NRW.Bank last week showed the perils of starting too tight with final books closing over €850m. "The blowout trades are definitely the ones that have come with a couple of basis points concessions," the first banker away said. "We've seen good performance versus swaps but there is a bit of a question mark around whether you can start tighter. I think in a more stable market, you can probably start tighter but we've had a bit of volatility and issuers are aware of that." Even for the rarer, lesser known names, there is good demand as shown by Investitionsbank des Landes Brandenburg, the explicitly guaranteed development agency of the Federal State of Brandenburg. It priced a €500m September 2031 flat to mid-swaps, the tight end of the 1bp area guidance. Leads DekaBank, Deutsche Bank, DZ Bank, Helaba and NordLB were able to increase the size from the €250m minimum as books passed €775m. "These deals are not always obvious but today's was a success," the second banker away said. "If you're a bank treasury or asset manager and you have lines for Bavaria or Hamburg but they're getting filled, then a name like this which is a bit like the new kid on the block can be easier to get a line for." More 10-year supply is on the way, courtesy of Hamburg and Agence Francaise de Developpement that have both mandates for new issues expected to emerge on Wednesday. While the short-end is clearly in demand, so is the longer part of the curve as shown by NRW last week, something that NWB Bank will be looking to capitalise on. It has mandated BNP Paribas, Citigroup, JP Morgan and Rabobank for a 25-year euro SDG housing benchmark bond, which will follow bilateral one-on-one calls with investors on T

BON
4 min read
EMEA
Helene Durand

BON RATE

UK DMO debut breaks demand and greenium records

The UK DMO moved the goalposts on Tuesday for green issuance as it received a rousing response for a debut green Gilt that broke records for size, demand and pricing in the asset class. Leads Barclays, BNP Paribas, Citigroup, Deutsche Bank, HSBC and JP Morgan opened books on Tuesday morning with guidance for the 0.875% July 2033 benchmark at 7.5bp–8.5bp over the 4.25% June 2032 Gilt. In typical DMO style, the spread was set at plus 7.5bp a mere 30 minutes later. It went on to launch at £10bn size with final demand at more than £100bn, including £10bn of joint lead manager interest. "This is not only a record book for a UK DMO syndication by some considerable margin but it's also the largest-ever green order book and shows the huge appetite for green sterling assets," said Asif Sherani, managing director, head of DCM syndicate EMEA at HSBC. "At £10bn, it's the largest-ever sovereign green bond, and while the UK could have printed considerably more, they were limited in terms of size. The ESG angle added demand, both from an international and domestic perspective." The order book beat Italy's green debut in March when demand was more than €80bn. The deal also eclipsed the UK DMO's own record – the £82.6bn book for last year's £12bn October 2030s. "The deal size came in at the upper end of expectations at £10bn. Taking into account the huge demand, the slim allocations (relative to a brown Gilt syndication), we expect this Gilt to perform well in the coming days and months," said Matthew Amis, investment director at ASI. "This will be aided by no further issuance of this 10-year green Gilt until Q1." The trade also set a new high mark for the greenium. At 7.5bp over the June 2032 Gilt, Sherani said the issuer had achieved a 2.5bp greenium based on an interpolation of where the UK's on-the-run 2031 and 2035 bonds are trading. "One of the previous stumbling blocks is that we wanted to be sure as much as we could be that we could achieve value for money for the UK taxpayer," said Robert Stheeman, chief executive of the UK Debt Management Office. "We feel that we have been able to achieve that in a very clear and unambiguous manner with this deal. At around 2.5bp, this is the largest-ever greenium by any sovereign for an inaugural offering." It beat Germany's debut green bond last year, the first trade to clearly demonstrate the pricing advantage of green instruments versus conventional paper and the 2bp greenium the country achieved on a 30-year syndication earlier this year. "They've got a huge reaction," another banker said. "We all hoped for this but you can never expect it; there is a distinct greenium here, the biggest we've ever seen." "We congratulate the Debt Management Office on the successful introduction of a green Gilt into the UK Gilt market and expect future issuance of green Gilts as the UK looks to expand the scope of maturities available to investors seeking greener investments," Amis said. Stheeman said that while the size of the book gave an indication of the significant demand and momentum behind the transaction, the true mark of the deal's success was the diversity in orders. "There were genuine new investors who had previously not appeared in a Gilt order book. We genuinely didn't set out to do a £10bn trade but under the circumstances felt this was appropriate." Playing catch-up The transaction has emerged just a few weeks ahead of the UN’s COP26 climate meeting, which is being held in Glasgow in November. Despite its ambitions to be a green leader, the UK has lagged as only the 11th biggest jurisdiction for green issuance globally, with US$9.84bn in total printed out of the country in 2021, excluding supranationals. Although that is double the US$4.84bn printed in 2020, it is far behind China with US$54.23bn year-to-date, the US with US$45.44bn, and Germany at US$44bn. Sherani said the trade was a game-changer for the UK green bond mark

BON RATE
6 min read
EMEA
Helene Durand

Bonds

Europcar announces debt refinancing as Volkswagen closes in

Less than a year after Europcar underwent a high-profile debt restructuring after its business collapsed during Covid-19, the French car rental company is back in Europe's high-yield market. The company is selling €500m in five-year non-call two sustainability-linked senior secured bonds via sole physical bookrunner BNP Paribas. BNPP is also a joint bookrunner alongside HSBC and Credit Agricole. Europcar Mobility Group's bond was announced shortly after a consortium led by Volkswagen made a €2.5bn offer for the company. The acquisition has been in the works since July. "We were waiting on that piece of the puzzle," said a source familiar with the deal. "It makes the whole process a little easier for the refinancing." Like many in the travel sector, Europcar was badly impacted by global restrictions to stop the spread of Covid-19. The company is now hoping that, with its new capital structure, support of deep-pocketed shareholders and economic recovery, it is back on the path to growth. This week's deal is one of the last steps in the rehabilitation of Europcar's capital structure and will refinance the company's 2.375% EC Finance notes due November 2022, which remained in place after the restructuring. The 2022s have security over the company's fleet. "This particular tranche of Europcar's debt has always been seen as slightly better than Europcar credit risk generally because it is a junior piece of fleet financing for the company's vehicles," said a second source familiar. "The 2022s always traded a lot tighter because it is not pure Europcar risk – you have security over the fleet." The refinancing has been well flagged since Europcar's creditors last year agreed to slash its €2bn debt by almost half, via a debt-to-equity swap in full of its 2024s, 2026s and a Credit Suisse facility. The restructuring, which was completed in February, also saw €250m of new cash pumped into the business. A group of hedge funds led by Anchorage Capital Group took over the business after they bought the company's debt at a deep discount. Banks kicked off three days of investor calls to market the new issue on Tuesday. The bond has two sustainability performance targets, related to carbon emissions and the "greenification" of Europcar's fleet. If the company misses both targets, the coupon will step up by 25bp. Sentiment holding up Elsewhere in the market, deals have been performing well despite continued tremors surrounding Chinese real estate group Evergrande's debt woes. Another new high-yield bond was launched, this time from Swedish outdoor company Dometic Group (Ba2/BB–). The company has hired BNP Paribas, Nordea and SEB to market a no-grow €300m seven-year. "For an opportunistic issuer to decide to go yesterday was tough – the equity market was horrible – but it feels a lot better today, which informed the launch of Dometic," said a leveraged finance banker. "Monday's equity rout dragged everything down because people were thinking about things on a macro basis. Trading now feels a bit more name-specific and things have calmed down." Meanwhile, demand allowed tyre company Goodyear Europe to increase its seven-year non-call three senior unsecured bond to €400m from €300m. The Ba3/BB–/BB– rated deal landed at 2.75%, versus initial price thoughts of 3%–3.25%. BNP Paribas was lead-left bookrunner, while senior joint bookrunners were Barclays, Credit Agricole and Deutsche Bank. Similarly, water treatment specialist Solenis was able to cut costs on its US$3.8bn financing package, which will fund its acquisition by Platinum Equity. The financing has been rejigged slightly, with the high-yield component now accounting for around US$2.1bn-equivalent, versus the US$2.4bn-equivalent initially marketed. Leads cut the size of the senior bonds to US$710m-equivalent, from US$1bn, with a corresponding increase in the term loan B, which is being marketed alongside the bon

BON
5 min read
EMEA
Eleanor Duncan

Bonds

Another record topples as Rentenbank books pass EUR5.2bn

The euro public sector bond market witnessed another record on Tuesday after books for Rentenbank's €1.5bn five-year transaction closed over €5.2bn, the biggest yet for the Germany agency. The EIB and KfW both beat order book records last week despite coming on the same day while a €5bn 15-year for Austria also garnered a record demand. "This is a record book for Rentenbank," a lead said. "There continues to be a lot of cash in the system, even though we have things like the Evergrande news which I would say is pretty big. But it feels like the market is insulated, anaesthetised, at least for now. It doesn't feel like we've had much of a break versus last week when everything worked, whether it was 5s, 10s, 15s, 30-year. Books were at record levels and it looks like Rentenbank will be a record." Rentenbank's trades can be hit-and-miss. A €500m December 2028 print sold in early September was only just subscribed with books passing €560m though that included €75m of lead interest. However, Tuesday's benchmark via Barclays, Deutsche Bank, Morgan Stanley and UniCredit that started as a €1bn minimum issue saw books grow exponentially. "If you look in that part of the curve, these agencies still offer a very healthy pick-up versus core and semi-core EGBs," a banker away from the deal said. "The EGB curves are steeper than agencies and SSAs in general so in five-year, you get something like 7bp-8bp pick-up over sovereigns whereas in 10-year, you're basically through France. Also, we've seen good performance in secondary from the likes of the EU or KfW that have tightened 2bp-3bp." The leads started marketing the Rentenbank deal at 10bp area through mid-swaps. Fair value for the deal was estimated at less 13bp based on the less 15bp at which EIB priced its €3bn deal in the same tenor last week. Another banker away said he thought the starting point had looked cheap. "They usually tend to start tighter and sometimes that works for them, sometimes it doesn't," he said. "But if you look at the end result, it was not too cheap."Mindful approach While demand has been abundant, issuers have had to be mindful of marketing levels and approach the market with reasonable premiums. A €1bn seven-year for NRW.Bank last week showed the perils of starting too tight with final books closing over €850m. "The blowout trades are definitely the ones that have come with a couple of basis points concessions," the first banker away said. "We've seen good performance versus swaps but there is a bit of a question mark around whether you can start tighter. I think in a more stable market, you can probably start tighter but we've had a bit of volatility and issuers are aware of that." Even for the rarer, lesser known names, there is good demand as shown by Investitionsbank des Landes Brandenburg, the explicitly guaranteed development agency of the Federal State of Brandenburg. It priced a €500m September 2031 flat to mid-swaps, the tight end of the 1bp area guidance. Leads DekaBank, Deutsche Bank, DZ Bank, Helaba and NordLB were able to increase the size from the €250m minimum as books passed €775m. "These deals are not always obvious but today's was a success," the second banker away said. "If you're a bank treasury or asset manager and you have lines for Bavaria or Hamburg but they're getting filled, then a name like this which is a bit like the new kid on the block can be easier to get a line for." More 10-year supply is on the way, courtesy of Hamburg and Agence Francaise de Developpement that have both mandates for new issues expected to emerge on Wednesday. While the short-end is clearly in demand, so is the longer part of the curve as shown by NRW last week, something that NWB Bank will be looking to capitalise on. It has mandated BNP Paribas, Citigroup, JP Morgan and Rabobank for a 25-year euro SDG housing benchmark bond, which will follow bilateral one-on-one calls with investors on T

BON
4 min read
EMEA
Helene Durand

Bonds

Enel presses on with ‘greenification LM’

Enel accelerated its pivot towards ESG-related debt on Tuesday, issuing sustainability-linked bonds in the euro market while announcing a tender offer for conventional dollar notes. This process of replacing standard bonds with ESG notes, whether green, sustainable, social or sustainability-linked, has been termed a ‘greenification LM’ by market sources and is a growing trend among corporate borrowers. The Italian utility has a target for 48% of its total gross debt to be ESG-related by 2023 and more than 70% by 2030. In 2020, the figure stood at 33%. As well as environmental incentives, there also appear to be strong economic reasons to replace conventional debt with ESG bonds. Enel projects that by issuing sustainability-linked instruments it can save 15bp-20bp, according to a recent investor presentation. Leads opened books on benchmark May 2026, May 2029 and September 2034 SLBs at spreads of 65bp, 80bp and 100bp areas over mid-swaps. Enel raised €3.5bn, split across €1.25bn, €1bn and €1.25bn tranches, from a combined book that reached over €10.3bn. “Anyone who knows Enel knows that when they say benchmark, they are going to go for something large,” said a banker involved. It did end up paying some premium after spreads were fixed at 35bp, 48bp and 70bp. Leads said the company paid a concession of 2bp-3bp on the two shorter notes and 10bp on the longer. “It’s a brilliant result though,” said a banker away from the deal. “If you are coming to do this size, as a base case you should be expecting to pay premiums and if you are doing a large multi-tranche trade you should expect some steepness, just to make sure you get that distribution across the tranches.”From renewables to emissions All three tranches carry a 25bp coupon step-up. On the shorter two notes, it will be triggered if Enel’s direct greenhouse emissions are above 148g per kilowatt hour as of December 31 2023. The longer bond’s coupon increase will be triggered if emissions are above 82g/kWheq by December 31 2030. The company emitted 214g/kWheq of gases, as of mid-2020. Emissions targets were featured in Enel’s euro and US dollar senior unsecured bonds issued earlier this year, as well as the €500m 1.125% October 2034 tranche of its inaugural euro SLB from 2019, but their greater use this year marks something of a shift away from the renewable energy targets that featured in much of the company’s SLB issuance during 2019 and 2020. The change is largely linked to this year’s update of the issuer’s framework. Previously, the only observation date for emissions was in 2030, limiting the KPI’s usefulness to longer-dated bonds. However, by adding a 2023 observation date in its updated framework, emissions targets can also be included in shorter-dated notes. As well as the bond issue, Enel also announced a US$1.5bn tender offer for three US dollar bonds with maturities in 2027, 2028 and 2029. There has been a recent spate of issuers – mostly US ones – replacing dollar debt with euro tranches, as the pricing in the single currency proves attractive out to 20 years. Enel was not alone in the euro corporate primary on Tuesday. Deutsche Bahn (Aa1/AA-, both negative) hit screens with a €750m 10-year senior unsecured, announced at IPTs of 55bp-60bp over mid-swaps through BayernLB, Bank of America, ING and IMI-Intesa Sanpaolo. Orders in excess of €2.5bn enabled leads to tighten to 32bp, for a concession of 2bp, according to those leading the deal.Issuer power Choppier markets potentially weighed on supply on Monday, with just one issuer out in euros - real estate company CTP. But with the Enel and Deutsche Bahn deals also going smoothly, more supply is expected soon starting with a hybrid from British American Tobacco, which is expected as soon as Wednesday. Bankers say that while there was some risk aversion at the start of the we

BON
6 min read
EMEA
Ed Clark

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BON SF

Final terms Red and Black Auto Germany 8 ABS

Issuer: Red and Black Auto Germany 8 UG Collateral: German Auto Loan Receivables Originator & Servicer: Bank Deutsches Kraftfahrzeuggewerbe GmbH (“BDK”) Arranger: Société Générale Lead Manager: Société Générale - Books are subject - Class B will price above par. Coupon set at 1mE+75bp - Allocation and Pricing this afternoon - B&D : SG - Settlement Date : 27 October 2021 - First Payment Date: 15 November 2021 - Legal Maturity Date: 15 September 2030 Excluding JLM orders * Excluding excess spread. ** Base case assumptions: 0% Delinquencies, 0% Defaults, 15% CPR, 10% Clean-Up Call exercised – see assumptions preliminary Prospectus. *** The coupons on all Notes are floored at 0%. Class A Notes are expected to price above par. Summary of the Provisional Portfolio (as of 31.07.2021) Outstanding Amount (EUR): 999,999,989.50, Original Amount (EUR): 1,232,867,649.68, Number of Loan Contracts: 81,532, Number of Debtors: 81,072, Average Balance per Loan Contract (EUR): 12,265.12, Average Balance per Debtor (EUR): 12,334.71, Outstanding Balloon Amount (in % of Outstanding Amount): 30.89%, Weighted Average Original LTV: 88.98%, Loan Type (Amortizing / Balloon): 36.79% / 63.21%, Client Type (Private / Commercial): 100.00% / 0.00%, Vehicle Type (New / Newly Used / Used): 13.45% / 34.59% / 51.97%, Weighted Average Original Term (months): 58.29, Weighted Average Remaining Term (months): 46.18, Weighted Average Seasoning (months): 12.11, Weighted Average Nominal Interest Rate: 3.53% - Format: Reg S Bearer - Listing: Luxembourg Stock Exchange - Clearing: Euroclear / Clearstream - Denominations (for all Notes): EUR100k x EUR100k - Billing and Delivery: Société Générale - ISINs: Class A - XS2385344457 Class B - XS2385345348 Class C - XS2385345421 Class D - XS2385345934 - The transaction is structured in a manner to comply with the requirements for simple, transparent and standardised securitisation transactions as set out in the Securitisation Regulation. - Third-party STS verification is provided by STS Verification International GmbH (“SVI”). - Risk Retention: BDK will retain for the life of the transaction a material net economic interest of not less than 5 per cent. in the Transaction in accordance with Article 6 paragraph (3)(c) of the Securitisation Regulation. Marketing Materials: - Preliminary Offering Circular - Investor Presentation - Data Package - ESG Questionnaire - Preliminary Loan Level Data (available on the European DataWarehouse) - Cash flow modelling: Intex RBALG8 and Bloomberg RNBAG 8 and Moody’s Analytics Red & Black Auto Germany 8 UG Manufacturer target market (MiFID II product governance) is eligible counterparties and professional clients only (all distribution channels). No PRIIPs key information document (KID) has been prepared as not available to retail in EEA.

BON SF
3 min read
EMEA

Bonds

DEAL: Nigeria USD1.25bn 6.125% Sep 2028 7yr

USD bmk 7yr. Part of exp ~3bn 7yr/12yr/30yr RegS/144A. B2/B-/B. Intl books Citi(B&D)/GS/JPM/StCh. Nigerian books Chapel Hill. IPTs 6.5% area. Guidance 6.25% area (+/-0.125% WPIR), launch 1.25bn at 6.125%, bk >3.5bn. T1.125% 8/28+500 at 1.125%. Priced Tues

BON
2 min read
Global

Bonds

DEAL: Nigeria USD1.5bn 7.375% Sep 2033 12y

USD bmk 12yr. Part of exp ~3bn 7yr/12yr/30yr RegS/144A. B2/B-/B. Intl books Citi(B&D)/GS/JPM/StCh. Nigerian books Chapel Hill. IPTs 7.75% area. Guidance 7.5% area (+/-0.125% WPIR), launch 1.5bna t 7.375%, bk >4.75bn. T1.25% 8/31+604.9 @ 1.326%. Priced Tues.

BON
2 min read
Global

RATE FX ECON

BUZZ-Fed could boost USD/INR a little, not a lot

Risk Fed's tapers has led to broad USD gains USD/INR has risen from low-end of long-held range to just above middle USD/INR has traded a rough 72-75 range since July 2020 Aug's dip below 73.00 was very short lived Upside held despite big rise in risk stemming from pandemic Chance Fed steers USD/INR out of this range is small Rise over 100-DMA has increased risk of move towards cloud twist 74.05-14 Post-Fed gain likely to provide chance for traders to buy INR bank carry EUR/INR shorts have proved a wise choice as a carry trade EUR/INR -4.7% last 110 days with carry boosted by ECB's negative rates Close under weekly cloud at 86.01 should enliven EUR/INR downtrend EURINRhttps://tmsnrt.rs/39ufrKW EURINR cloudhttps://tmsnrt.rs/3AxuBLu USDINRhttps://tmsnrt.rs/3hYnbtg

RATE FX ECON
2 min read
Global
Jeremy Boulton

RATE FX

BUZZ-USD/JPY options flag Fed volatility and downside risk

USD/JPY option implied volatility gained with risk aversion this week Also added JPY call over put premium - shows spot downside fears grew Downside strike volatility plays would benefit more if USD/JPY fell Risk sentiment improves as Evergrande situation calms, but options hold bids Market remains nervous as FOMC looms, with downside still seen vulnerable Overnight expiry implied volatility shows extent of Fed risk nL1N2QO0GD For more click on FXBUZ USD/JPY overnight, 1-week and1-month expiry implied volatilityhttps://tmsnrt.rs/2XROCy5 USD/JPY 1-month risk reversals add premium for JPY calls over puts,https://tmsnrt.rs/3EyS6WO

RATE FX
2 min read
Global
Richard Pace

BON RATE

GBP GOVTS AUCTION - GBP0.35bn 0.125% 2056 linker sees uneventful sale

GBP0.350bn UKT 0.125% November 2056 linker sold at a real yield of -2.289%, 2.12 times covered. Total bids came in at GBP0.7425bn at this morning's sale to produce a cover of 2.12 times. This was lower than the last tap on March 24 which was solid and covered 2.17 times. The tap prior to this was on September 2 2020 and was stronger being covered 2.26 times. The real striking price of 231.500 came in well below the offer side of the market as the bidding deadline expired when Dec Gilts were 127.40. Dec Gilts are around 4 ticks lower. The auction saw the breakeven around 17bp higher as the market embraces thoughts of higher inflation. On a RV basis, the linker curve is very flat from 2029 to 2055 but there was around 2bp of value on the mis matched fly between the 1Q55’s and 0.125% 2058 lines. The modest size of the sale and institutional demand has averted any real drama but the results were modest at best. The DMO is next in the market on Tuesday September 28 with a tap of the 1.250% 2051 line. Taps of the 0.25% 2025 and 1.125% 2039 stock follows on October 5 with a sale of the 0.500% 2029 line next on Wednesday October 6.

BON RATE
Quick read
EMEA
Stephen Bough

Bonds

Books for AFD 10yr sustainable over EUR7.3bn, spread set

* Books EUR7.3bn+ (150m JLM), closing 10:30am. Spread set at OATs +18. (10:09am) * Books EUR4.8bn+ (150m JLM). Guidance revised to OATs +19 area (+/-1 wpir). (9:30am) * Guidance interp OATs (0% Nov 2030 & 0% Nov 2031 mids) +21 area, benchmark size, pricing today. Due 29 Sep 2031, pay 29 Sep, French law, Paris listing, 100k/100k denoms, Reg S bearer dematerialised. ISIN FR0014005NA6. Natx is B&D and DM. (7:56am) Agence Francaise de Developpement – AFD - (rated AA Stable/ AA Negative) has mandated BNP Paribas, BofA Securities, Commerzbank, J.P. Morgan and Natixis as Joint Lead Managers for its upcoming 10-year Sustainable Benchmark maturing on 29th September 2031. The issue will be launched in the near future subject to market conditions. The manufacturer target markets (MIFID II product governance) are professionals and eligible counterparties (all distribution channels). FCA/ICMA stabilisation. The proceeds will be used to finance and/or refinance eligible sustainable expenditures as set out in the SDG Bond Framework: https://www.afd.fr/sites/afd/files/2020-10-07-38-47/sdg-bond-framework-afd.pdf. Vigéo Second Party Opinion: https://www.afd.fr/sites/afd/files/2020-10-07-38-45/vigeo-eiris-second-party-opinion-sdg-bond-framework.pdf. (Sep 21)

BON
Quick read
EMEA
Julian Baker

Bonds

Books for ING Groep 7NC6 over EUR1.25bn

* Books EUR1.25bn+. (10:07am) * IPTs MS+85/+90, benchmark size, pricing today. Due 29 Sep 2028, call 29 Sep 2027, pay 29 Sep. Resets to 3mE + spread if not called. Callable on a Loss Absorption Disqualification Event, at any time, at par plus accrued ; and at par plus accrued on a withholding, or a change in applicable tax treatment. Off DIP, Dutch law, Amsterdam listing, 100k/100k denoms, Reg S bearer. ISIN XS2390506546. ING is B&D. (8:04am) ING Groep N.V. (rated Baa1/A-/A+ (Moody’s/S&P/Fitch)) has mandated BNP Paribas, Credit Suisse, Deutsche Bank, DZ BANK, ING and NatWest Markets as Joint Bookrunners for its upcoming benchmark Euro-denominated RegS bearer 7NC6 HoldCo transaction. The transaction is expected to be launched in the near future, subject to market conditions. FCA/ICMA stabilisation. Manufacturer target market (MIFID II product governance) is eligible counterparties and professional clients only (all distribution channels). No PRIIPs KID. (8:04am)

BON
Quick read
EMEA
Julian Baker

BON RATE

EUR GOVTS - Modest concession for 5/36 Bund tap

Bunds are putting in a modest concession before this morning’s €2.5bn 5/36 tap. Outright yields are slightly higher, up a little over 1bp for this bond, and by about the same for 10-year paper. The bond is also roughly in line with surrounding issues, within the confines of choppy price action particularly for off-the-run paper. On a cross-markets basis, the 5/36 Bund is little changed to France and DSLs. Expectations for the tap are a tough call considering the duration coming into a market which, until Monday’s stock market rout, had been selling off from the end of August. Considerable value has been restored to the market during that selloff, but investors may still be wary of taking long duration into what had been, and without a more significant bounce will remain, a bear steepening market. For all these negatives, however, the market remains considerably cheaper than it was one month ago, and concerns regarding global equities seem likely to remain in place at least through this evening’s Federal Reserve decision and then the payment of Evergrande’s coupons, domestically and especially in dollars, tomorrow.

BON RATE
Quick read
EMEA
Michael Cartine
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Final terms Red and Black Auto Germany 8 ABS
DEAL: Nigeria USD1.25bn 6.125% Sep 2028 7yr
DEAL: Nigeria USD1.5bn 7.375% Sep 2033 12y
BUZZ-Fed could boost USD/INR a little, not a lot
BUZZ-USD/JPY options flag Fed volatility and downside risk
CIBC sets spread on CHF250m+ 7.5yr senior
JPN GOVTS CLOSE: JGBs take a breather before Japan holiday
GBP GOVTS AUCTION - GBP0.35bn 0.125% 2056 linker sees uneventful sale
Books for AFD 10yr sustainable over EUR7.3bn, spread set
Books for ING Groep 7NC6 over EUR1.25bn
EUR GOVTS - Modest concession for 5/36 Bund tap
Books for BAT perp NC5.25 and NC8 hybrids over EUR2bn
EUR SWAPS - Bunds recover early losses on strong issuance pipeline
EUR GOVTS - OAT rebound not yet impressive, thicket of resistance
BUZZ-COMMENT-USD/CAD will see the biggest reaction to a hawkish Fed
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