CORP WEEKLY: Market reopens with aplomb

The European primary bond market awoke from its summer slumber this week as issuers wasted no time to take advantage of increased market participation following the vacation season.

Overall, weekly single currency issuance was the highest since the w/e 12-Jul at EUR31.1bn, whilst the IG corporate sector saw its biggest euro issuance week since the w/e 14-Jun.

Six companies raised a combined EUR6.5bn via 10 separate tranches, which was more than the EUR6bn to price in the previous four weeks combined.

The EUR6.5bn total was also considerably bigger than the corresponding week last year when EUR2.7bn was issued, before the following week produced the most of any week of 2023 at EUR18.8bn.

Lots of demand to go around

Investors gave the first post-vacation season issuance the green light, with large orderbooks recorded across the board.

There was, however, some resistance put up after issuers shaved an average 37.78bps from IPTs to reoffer and in turn whittled down the average final NIC to just 1.8bps.

Demand for the EUR6.5bn of paper on offer peaked at EUR25.85bn before settling at a still impressive EUR20.18bn, with an average cover ratio of 3.16x recorded.

Weekly issuance crammed into three-days

Getting the corporate market underway for the week were Amprion (EUR500m 6yr / EUR600m 15yr green) and Volvo Treasury (EUR700m 3yr / EUR500m 5yr vanilla), which both issued their second dual-tranche deals of 2024 on Monday.

The pair received a strong response from investors, with combined demand coming in at EUR7.55bn, having earlier peaked at EUR8.6bn.

EUR3.9bn (EUR4.7bn peak) of that came for German transmission system operator Amprion’s green bonds which landed with NICs of 5bps on the 6yr and zero on the 15yr.

Volvo Treasury AB (publ), the financial arm of Swedish automaker AB Volvo, saw slightly smaller books of EUR3.65bn (EUR3.9bn peak) with NICs of 2bps and 5bps on the 3yr and 5yr lines respectively.

The sector saw two visitors to the euro market for the second day in a row on Tuesday, and again the investor reception was strong.

German automaker BMW AG was the volume booster as the regular bond issuer refreshed its curve with a EUR1bn 3yr, EUR750m 6yr and EUR750m 10yr three-part.

The bonds landed with low-mid single digit NICs having been ramped in 32.5-34.5bps from IPTs on combined demand of EUR5.75bn (EUR7.5bn peak).

Offering a higher-beta option and testing the hybrid waters on Tuesday was German peer Merck KGaA, with its first subordinated deal in four-years and the first from any corp since 20-Jun.

It’s safe to say the EUR800m 30NC5.25 deal was a hit, with a peak orderbook of EUR5bn allowing the borrower to print with a yield of 4% (zero NIC) from a 4.625-4.75% starting point.

That came at the expense of a few orders though with demand finishing up at a still impressive EUR3.6bn.

With Merck’s trade, year-to-date euro corporate hybrid supply is now at EUR14.035bn and just short of 2023’s full-year total of EUR14.2bn.

The last of this week’s corporate supply came on Wednesday as UPM-Kymmene Corp (EUR600m 10yr green) and PACCAR (EUR300m no grow 3yr vanilla) both extended their existing curves and secured economic funding.

The former emerged from the pipeline with its latest green bond which was upsized from an expected EUR500m on the back of books that finished up at EUR2.35bn (EUR3.2bn peak), with that also allowing the borrower to shave 37bps off IPTs and print with a NIC of -2bps.

PACCAR’s opportunistic and rather defensive line was just half the size at EUR300m. After 40.5bp was hacked from the mid-point of the m/s +85-90 IPTs range the order book fizzled down from EUR1.55bn (peak) to a final EUR930m.

That left the A+/A1 rated 3yr transaction pricing at m/s +47 and 3bp inside fair value.

Away from euros and Toyota Finance Australia offered the first IG corporate sterling paper since 29-Jul on Wednesday, with that coming in the form of a GBP300m (from benchmark) Mar 2028 line.

Demand for the deal peaked at GBP590m (GBP500m final), which saw the borrower issue at gilts +98 from a +110-115bp starting point.

Summary of this week's EUR IG corporate supply

Floodgates set to open

With this week’s deals having been met with a strong investor reception and as more participants return from vacations, supply is expected to accelerate next week.

It’s likely to be a slow start to the week given the UK Bank Holiday Monday, but after that the floodgates are set to open according to market participants we spoke to on Friday morning.

One of those known to be wanting to go next week is German residential real estate company TAG Immobilien AG which on Thursday morning hired leads for calls on Monday and Tuesday ahead of an inaugural EUR 5.5yr benchmark.

Joining TAG in the pipeline on Friday was DSB, the Danish State owned public passenger trains operating company. The borrower is also conducting calls on Monday and Tuesday ahead of a EUR500m no grow 10yr inaugural green bond benchmark.

In the pipeline

** TAG Immobilien AG (Baa3/BBB-) mandated BofA Securities, Deutsche Bank, J.P Morgan and Societe Generale as Joint Bookrunners to arrange a series of fixed income investor calls 26-27 Aug. An inaugural EUR 5.5yr benchmark fixed rate senior unsecured offering may follow

** DSB (Aa1) hired Citi, Credit Agricole CIB, Danske Bank, Nordea and SEB as Joint Lead Managers for a potential EUR500m no grow 10yr inaugural green bond benchmark. Calls take place 26-27 Aug

Performance tracker of recent EUR IG/split-rated benchmark deals

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