Strong start for busy FIG supply week amid tariff deal boost
FIG issuers made the most of buoyant market conditions on Monday as investors cheered a tariff deal between the US and China, with HSBC sealing an almost three times subscribed €1.25bn Tier 2 transaction.
The deals kicked off a week that debt capital markets bankers have for some time billed as an important one for FIG issuance. It is the first five-day window clear of European public holidays and central bank meetings after banks' Q1 reporting blackout periods, and also the first following the recovery in spreads and market conditions from the volatility triggered by the US's so-called reciprocal tariff announcements on April 2.
Markets were further boosted on Monday by news of an agreement between the US and China to temporarily slash tariffs imposed on each other's imports, after talks in Geneva over the weekend. The de-escalation of the trade war between the two countries eased investors' recession fears and sparked a rally in equity markets.
The implications for financials' primary market activity were positive and especially so for credits with a significant presence in Asia, such as HSBC, said market participants. The bank was among the first issuers in the market on Monday morning, announcing an 11-year non-call six Tier 2.
HSBC had already been one of the busier FIG issuers so far this month, having tapped the euro and US dollar senior unsecured markets last week, and on Monday benefited from the tariffs agreement tailwind to secure more than €3.5bn of final demand for the subordinated trade.
Sole lead HSBC marketed the deal with initial price thoughts of mid-swaps plus 215bp area. The spread was set at 183bp on the back of more than €3.9bn of orders, before the size was set at €1.25bn.
Market participants' views on the deal's fair value diverged somewhat, depending on whether they extrapolated from HSBC's outstanding shorter call Tier 2s and the Tier 2s of other European issuers or from HSBC's senior unsecured curve. Some bankers said the deal offered around 3bp of new issue premium at most, using the former methodology, while extrapolating from the seniors suggested the deal priced at around fair value.
In the senior unsecured market, Bank of Ireland and Jyske Bank achieved identical pricing outcomes for a seven-year non-call six green holdco senior transaction and a 6.5-year non-call 5.5 senior non-preferred offering respectively.
Both issuers started marketing with IPTs of mid-swaps plus 160bp area and tightened 33bp to final spreads of 127bp. Bank of Ireland in particular drew impressive demand.
Leads Davy, HSBC, ING, Morgan Stanley, Societe Generale and UBS pulled in more than €4.6bn of orders and set the size of the deal at €750m. There was no attrition from the peak of the order book.
Bankers said the blowout book partly reflected the fact that the deal was Bank of Ireland's first euro benchmark senior unsecured issuance since November 2023, as well as the deal's timing coinciding with the market rally.
"A lot of this is timing on the Bank of Ireland side, also with the rarity, the modest volume, and [it being] a well-liked issuer," said a banker at one of the leads.
Jyske's €500m no-grow November 2031 non-call 2030 note, meanwhile, garnered more than €2.9bn of demand (pre-rec, including €35m of JLM interest).
The Danish issuer has been a more regular presence in the euro senior unsecured market than Bank of Ireland over the past 18 months, having issued one or two SNPs per year, but still benefited from some scarcity value, said bankers.
Citigroup, Nordea, Jyske Bank and UBS had the mandate.
Elsewhere on Monday, Wuestenrot Bausparkasse sold its inaugural benchmark senior preferred, a €500m five-year note.
Leads ABN AMRO, Commerzbank, Erste Group, LBBW, NordLB and UniCredit marketed the deal with IPTs of mid-swaps plus 140bp area before setting the spread at 115bp. The final book stood above €935m (including €95m JLM interest).