REFILE-Germany lines up syndicate, ignores court turmoil
Refiles to clarify likely 5bp pick-up in paragraph 10 is on an asset swap basis
Germany shrugged off turmoil in eurozone government bonds and the end of Golden Week in Japan to name five banks to lead its maiden conventional euro syndication.
The lead managers - BNP Paribas, Bank of America, Credit Agricole, Commerzbank and HSBC - are drawn from the top tier of the 'Bund Issues Auction Group' of primary dealers, as the Finanzagentur debt management agency had indicated they would be.
"It is clear that those banks that have strongly supported the Bund in the past in their role as members of the Bund Issues Auction Group will receive special consideration,' a spokesperson said recently.
Of the five, only Credit Agricole did not place among 2019's five most active dealers of Bunds, according to the Finanzagentur's weighted ranking. It came in eighth, behind Denmark's Danske Bank - which achieved a surprise fifth place - and two national champions, UniCredit and Deutsche Bank.
The Auction Group's remaining 31 members will be invited into the co-lead group.
Until now Germany has only ever used syndication for non-standard products such as foreign currency and inflation-linked debt.
But with central government in Berlin needing to increase borrowing significantly to fund its coronavirus response - the Q2 2020 target has twice been increased to reach the current €130.5bn level - the eurozone's reference sovereign credit is launching its first syndicated conventional Bund.
It will also tap the August 2050 Bund by syndication in June, while 'further syndicates are possible in the second half of the year', according to the Finanzagentur.
NO IPTs
Germany and its leads are not offering any initial price thoughts for the 15-year, which it will tap by auction next month. Instead, it will provide price guidance when launching the deal formally tomorrow (subject to market conditions).
As reported, Commerzbank research has forecast that the new 15-year will offer a pick-up of 5bp to the on-the-run February 2030, on an asset-swap basis. While the sovereign is reluctant to offer a new issue premium, "it needs to pay a bit", a German syndicate manager judged - especially as the June tap will limit the bond's secondary market performance.
Foreign central banks and bank treasury asset/liability managers are likely to form the key investor groups for the issue, Commerzbank said.
The Finanzagentur has said that the offering will have a 'significant benchmark size'.
Commerzbank puts the likely size at €7bn. The bank expects at least €5bn as the Finanzagentur's overall requirements dictate raising €11bn across the May and June syndications.
The deal is hitting a narrow issuance window.
China and Korea were celebrating national holidays earlier this week. Germany itself, as well as both France and the UK, will be off on Friday (May 8). Japan, whose Golden Week of national holidays concludes with Constitution Memorial Day on Wednesday, is the only major market due to be closed.
COURT TURMOIL
The announcement comes after the German Constitutional Court in Karlsruhe sent shockwaves through eurozone government bond markets by giving the European Central Bank (ECB) three months to demonstrate that its public sector purchasing programme (PSPP) is proportional.
Without this the Bundesbank "may thus no longer participate in the implementation and execution of the ECB decisions at issue".
The ruling formed part of a broader judgement by the court that rejected a complaint against the ECB's asset purchasing programmes, including the PSPP, by a 7-1 vote.