Just one investment-grade corporate took the opportunity to raise funds in the euro market on Thursday, with German utility E.ON placing a dual-tranche trade that saw orders heavily skewed to the longer, ESG-labelled note.
E.ON (Baa2/BBB/BBB+) raised €1.8bn from a conventional five-year bond and a 12-year green note. The January 2035s got more than €4.8bn of the €6.6bn-plus total orders at guidance, to price inside leads' fair value estimate.
"Investors are very hungry for duration, so the story remains at the long-end, as we've seen in Engie's triple-tranche deal yesterday. We're seeing good, solid demand from real money accounts across the board," said a lead before the deal was launched. He explained that E.ON's trade avoided coming head-to-head with French utility Engie's green triple-trancher on Wednesday that also saw the biggest demand on the longest 20-year tranche, which priced flat to fair value.
E.ON's €800m January 2028s and €1bn January 2035s landed at mid-swaps plus 67bp and 100bp. A lead saw respective fair value at 55bp and 105bp, meaning the former paid up by 12bp, while the latter paid a negative 5bp concession.
"We should have demand at the long-end this year. As an investor, for best performance, you would want to go long with expectations that spreads will tighten and underlying yields remaining flat or falling," said a syndicate banker.
Initial price thoughts were set at 90bp and 140bp areas via Commerzbank, JP Morgan, Morgan Stanley and MUFG. At the time guidance emerged - at 70bp area and 110bp area - investor demand was sufficient for E.ON to sell more than the expected €1.65bn.
The bonds' expected ratings are Baa2/BBB/A–.
Pipeline not huge
The euro corporate market has seen measured sessions this week, with a supply of €7.2bn from five borrowers, including E.ON.
With a European holiday falling on Friday, all eyes are now focused on next week's supply.
"There are a number of things that are to be completed in the next two weeks but the pipeline is not huge," said the first syndicate banker.
The second syndicate official said: "Next week will be busy, but nothing that will derail our supply expectations."