DAILY CLOSE: Berlin Hyp breaks new ground with blockchain-based digital covered bond
** Risk bears were firmly in control at the end of the week amid a tech-led sell-off, which in turn kept European bond market activity to a minimum along with the distraction of a lower-than-expected US payroll print. The only deal of any sort to price came thanks to Berlin Hyp which issued a debut EUR100m Jul 2027 blockchain-based digital mortgage covered bond that was set at m/s +15 from the outset after a recent roadshow (details in IGM’s DAILY EUR NICS & BOOKS)
** Friday’s Berlin Hyp transaction topped up the weekly single currency haul to EUR7.92bn, up from the year-to-date low of just EUR1.375bn set the previous week. This week’s issuers executed their deals without any trouble despite headline distractions elsewhere and thinned out market participation amid summer holidays. It was the corporate (ex-HY) sector which led the way with EUR4bn of the total volume and six of the twelve tranches to price. For the full breakdown of this week’s euro issuance by asset class and maturity, see IGM’s WEEKLY VOLUME
** IG corporate single currency supply finished up at EUR4bn (six tranches) thanks to four issuers, which saw plenty of buyers despite the distraction of vacations, central bank verdicts and earnings. This week’s quartet of euro corporate issuers all achieved good outcomes with the average NIC paid at just 6.5bps after issuers were able to ramp in pricing on average 32.67bps from IPTs on the back of combined demand which was strong at EUR11.2bn (EUR14.8bn peak). For a full recap of this week’s IG corporate activity see the IGM CORP WEEKLY
** In non-covered FIG, novelty, rarity and an ethical tag all played a part in helping a trio of issuers to successfully raise EUR2.75bn in euro funding this week. Two UK issuers (NatWest & Lloyds) brought senior HoldCo green trades while Spain’s CaixBank delivered the first Tier 2 bank supply in over three weeks and its first since May 2023. Demand was ample with this week’s average cover ratio at 3.37x while NICs were minimal or even negative. Next week will see another nine members of the Stoxx banks index report quarterly earnings to follow the 33 that have already updated investors. How many will look to access a thin summer market is uncertain though and much will depend on the ability of markets to find a durable floor. See IGM’s FIG WEEKLY
** Berlin Hyp was the only borrower to print any covered paper this week, selling a EUR100m Jul-2027 blockchain-based digital HP on Friday following calls more than a week ago. The spread was set at m/s +15 from the outset and no books were disclosed throughout execution. It takes the year-to-date euro covered total to EUR119.55bn
** ESG issuance remained at a steady pace this week at a total of EUR2.224bn equiv (17.74% of weekly total issuance) despite a muted deal flow across all sectors of the market. By asset class, FIG issuers paved the way to raise a total of EUR1.75bn (78.68%) of green notes in the single currency, vs a EUR474m equiv (21.32%) green solo sterling deal via corporate issuer South West Water Finance Plc. See IGM's Europe Credit ESG Weekly
** European SF: July 2024 Supply in Review - July closed with around EUR14.5bn of bonds placed with investors, which was up around 25% on June. Among that total, CLOs and RMBS led the way. CLOs accounted for 22 deals, and 12 of those were new issues (the rest being nine resets and one refi). July's tally of EUR5.2bn took the YTD new issue CLO total to EUR30bn. RMBS sales of around EUR4bn helped the YTD total to nearly EUR35bn and more than double the volume seen at the same stage in 2023. The auto market was more subdued, with just two deals printing.
IGM Credit Excel spreadsheets and reports
** The IGM European Weekly Credit Overview is your comprehensive round-up of primary European new issue activity including pricing, order book information, new issue concessions and ISINs
** The IGM European Weekly Cheat Sheet provides proprietary intelligence on Euro primary market trends using various key data points in an easily digestible Excel spreadsheet. This includes Euro new issue volumes, average new issue concessions and book cover ratios across asset classes, as well as other key credit proxies
** The IGM Roadshow Calendar is your one stop window on who, when and where. The calendar view provides an instant snapshot of which days are already earmarked for meetings in a convenient PDF format, with clickable links that take you directly to the known schedule
IGM's Legal Notices
This week's tender announcements include Vodafone Group Plc (US92857WBK53, XS2560495462, XS1721422068+), Ocado Group plc (XS2090948279, XS2393761692).
You can find these and more on IGM's Legal Notices story look-up function, where clients can access announcements on tenders, consents, exchanges and stabilisation notices.
For IGM's Legal Notices click here.
Friday's broader market developments - Fed to cut 50bps in Sep?
** Risk assets remained under heavy pressure and yields continued to fall before and after a weak US employment report which further heightened US hard landing fears following Thursday’s weak ISM manufacturing data and jump in jobless claims. Also weighing on sentiment were badly received updates from Intel and Amazon while gold stayed in the ascendancy, up 3.8% on the week and was closing in on July’s record peak
** Stoxx600 -2.30% at worst, losses led by tech. Index breached July low at 503.78 (session low 500.06), a close below which could reinforce a bias to sell strength
** Govvies: 10yr German yield fell by up to 9.1bps to 2.153%, making for a 7-day/29bps drop
** Data:
- FR Jun Industrial Production MoM missed at 0.8% (exp 1.0%, prev rev to -2.2%)
- IT Jun Industrial Production MoM above f/c at 0.5% (exp 0.0%, prev 0.5%)
- US Jul Change in Nonfarm Payrolls below f/c at 114k (exp 175k, prev rev to 179k)
- US Jul Unemployment Rate rose to 4.3% (exp & prev 4.1%)
- US Jul Average Hourly Earnings MoM slowed to 0.2% (exp & prev 0.3%)
What to watch Monday (and for the week)
** Key Data: JN Jul F Jibun Bank Composite/Services PMIs (01:30), CH Jul Caixin Composite/Services PMIs (02:45), SP Jun Industrial Production (08:00), SP Jul HCOB Composite/Services PMIs (08:15), IT Jul HCOB Composite/Services PMIs (08:45), FR Jul F HCOB Composite/Services PMIs (08:50), GE Jul F HCOB Composite/Services PMIs (08:55), EC Jul F HCOB Composite/Services PMIs (09:00), EC Aug Sentix Investor Confidence (09:30), UK Jul F S&P Global Composite/Services PMIs (09:30), EC Jun PPI (10:00), US Jul F S&P Global Composite/Services PMIs (14:45) and US Jul ISM Services Index (15:00)
** Key Events: BoJ Jun Meeting Minutes (00:50). Fed’s Goolsbee (13:30) & Daly (22:00) speak
** Auctions: No major term auctions scheduled for Monday 5th Aug
** Earnings: 2 Stoxx600 & 7 S&P500 companies report
** Viewpoint - The week ahead:
- US Senior Loan Officer Opinion Survey on lending practices (Monday)
- RBA to hold at 4.35% (Tuesday). Rate hike off the table for now
- Japan June earnings/household spend (Tuesday). BoJ summary of opinions (Friday)
- US July services ISM (Monday). June consumer credit (Wednesday). Jobless claims (Thursday)
- BoC Summary of Deliberations (Wednesday). Canadian July labour market report (Friday)
- New Zealand Q2 labour market report (Wednesday). Q3 2-year inflation expectations (Thursday)
- German June factory orders (Tuesday), IP/trade (Wednesday)
- June Spain IP (Mon). June EMU retail sales (Tue). June Italian (Tue), French (Wed) trade
All times BST
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