Active debt issuance from European banks as market window opens

A reasonable market window opened up this week, prompting a number of European banks to venture into the bond market with covered, senior preferred, non-preferred and Tier 2 supply. Deals are getting executed, but it is not all plain sailing.

The European banks and covered bond vehicles in the market in the past day and a half have generally been large banks and frequent issuers. But the direction of travel from initial price thoughts to final pricing on Monday’s primary flow suggested a degree of pushback as some issuers struggled to squeeze down on price while investors continue to demand new-issue concessions to compensate them for latent volatility.

Tuesday’s issues in marketing had a Scandinavian flavour. Svenska Handelsbanken received EUR 1bn in initial interest at initial price thoughts of 200bp area over mid-swaps for its expected EUR 500m 11-year Tier 2 callable at six years. DNB Bank received EUR 1bn in early demand for its benchmark four-year senior preferred offering callable at three years. Initial price thoughts are MS+75bp area. Covered bond supply also continued on Tuesday, with Swedbank pushing out price guidance of 9bp over mid-swaps and set the spread at MS+6bp for a benchmark euro-denominated five-year Swedish covered bond; books quickly rising to above EUR 1.45bn

Elsewhere, ABN AMRO is marketing a benchmark euro-denominated senior non-preferred green trade split into a five-year with initial price thoughts of MS+120bp area and a 10-year with IPTs of MS+150bp area. Demand had reached above EUR 1.75bn by mid-morning. Santander UK is out with a four-year US dollar-denominated covered bond with price guidance at SOFR MS+72bp

Credito Emiliano had mandated leads for a EUR 500m (no grow) seven-year soft-bullet Obbligazioni Bancarie Garantite mortgage covered bond on Monday but set a MS+22bp spread Tuesday

Monday was a reasonably busy day for European financials. Credit Suisse priced a dual-tranche senior unsecured opco trade initially offering optically attractive spreads above 130bp for short-dated paper before tightening through syndication. The bank sold a EUR 1bn two-year fixed-rate tranche at MS+120bp (initial price thoughts MS+135bp area) and a EUR 750m two-year FRN at the Euribor equivalent, around 3mE+123bp (3mE+138bp area at IPTs). Demand for the fixed piece was EUR 1.6bn and for the floating-rate tranche, EUR 1bn.

Societe Generale went with a two-tranche euro-denominated senior preferred offering: a EUR 1bn three-year with a two-year call at MS+60bp (against initial price thoughts of MS+80bp area), and a EUR 1bn seven-year with the spread set at MS+110bp (initial price thoughts MS+125bp area). Books closed at EUR 1.5bn for the 3NC2 and at EUR 1.6bn for the seven-year.

In covered bonds, Credit Agricole Home Loan SFH drew orders of around EUR 1.5bn for its EUR1bn eight-year Obligations de Financement de l'Habitat covered bond at MS+10bp, the tight end of MS+11bp +/-1bp guidance. Initial price thoughts were MS+11bp area. DZ Hyp’s EUR 750m nine-year mortgage covered bonds came at 5bp over mid-swaps, the middle of revised guidance of MS+5bp +/-1bp. Books closed above EUR 1bn. Initial guidance was MS+7bp area.

All deals data is from Bond Radar (www.bondradar.com).

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