Investment-grade bankers braced for lighter supply
The European investment-grade corporate bond pipeline is expected to remain light next week, with many issuers not in any particular need to fund, thanks to frontloading their targets.
Central bank meetings led by the FOMC could also deter would-be borrowers in case they spark any market volatility.
Bankers said this week's supply has disappointed and is below the seasonal average. In the euro market, only six issuers have printed deals this week, raising a combined total of €5.1bn. Vodafone's €1.4bn dual-tranche hybrid on Tuesday was the biggest transaction.
The public pipeline, moreover, isn't brimming with deals. Indeed, there is just one euro mandate, a debut €500m no-grow seven-year note from CBRE Europe Logistics Partners (rated BBB+ stable by Fitch), a pan-European logistics fund managed by CBRE Investment Management.
The issuer is holding calls through to the end of the week via global coordinators BNP Paribas and ING, along with ABN AMRO, Credit Agricole CIB and HSBC as active bookrunners.
There is also a sterling mandate with LSEG, the parent company of IFR, holding calls on Friday for benchmark long three and seven-year notes via Barclays, Citigroup, Lloyds, Standard Chartered and TD Securities. The issuer is LSEGA Financing.
One reason for the lack of a pipeline is because some issuers went earlier than expected. "A lot came out during the summer period as they saw conditions were constructive and valuations were attractive for issuers, plus the [expected] volatility in French politics," said a banker.
The banker said he compared notes with other banks and none seem to have a ton of deals to come over the next few weeks.
However, a second banker said earlier this week his pipeline was picking up. "Our pipeline is building for the coming weeks and we expect activity to kick off from next week, including French names," he said.
One sector that could change the supply dynamic is US issuers. "The big question is whether there will be more reverse Yankee issuances as that can change the stats quite a lot," said the first banker.
Ford (Ba1/BBB–/BBB–), for instance, returned to the euro market for the third time this year on Tuesday and brought an upsized €1.2bn dual-tranche offering. Avery Dennison was another US issuer, although it only printed a €500m deal.
It's certainly an opportune moment for issuers given how this week's deals have all priced at aggressive levels.
"We started to be a bit concerned previously, when the market was in a worse shape than expected and investors were very reluctant for tight price talks. But once macro news proved to be slightly more positive than expected, we saw a notable shift at the end of last week," said a third banker.