DAILY CLOSE: Measured Monday but more issuers eye pre-ECB window
By Matthew Barrett October 14 2024 at 16:00
** It was a fairly sedate start to the new week in terms of fresh single currency bond issuance, as just six deals priced for a combined EUR3.375bn. Predominant on Monday were ESG trades with EUR2.75bn of the overall issuance number and four of the six deals coming in ethical format, with the full breakdown in the usual IGM DAILY EUR NICS & BOOKS. Whilst the pace was measured on Monday, supply looks set to pick up in the near future with a number of issuers sat in the pipeline after recent mandates for trades ahead of the looming ECB verdict on Thursday which is likely to shutter primary
** Coming into this week, participants in our weekly issuance poll were calling for an average EUR2.5bn of non-covered euro FIG supply to come to market, with earnings blackouts and Thursday’s ECB meeting providing a distraction. EUR1bn of that printed on Monday, thanks to de Volksbank (7yr green SNP) and Banco Comercial Portugues (5NC4 senior preferred) which both capped their opportunistic trades at the start of the week as EUR500m no grow. Both issuers found solid demand on the day with the trades 2.4x and 2.6x covered as per the last update, with the final NICs seen in the low-single digits. See IGM’s FIG SNAPSHOT for more background
** A solo SSA issuer made it over the line to kickstart the week with Land NRW offering up a new 5yr sustainability line after a weeklong round of investor updates. The new 5yr deal was sized at EUR1.25bn and was priced into demand of EUR2.5bn and presumably helped by the recent investor contact. The 2x cover ratio was accompanied by a 3bp NIC which was down a touch from the 5bp and 4bp achieved by State of Hessen (EUR1bn 7yr) and the City of Hamburg (EUR500m 5yr) in recent weeks when we first noted that concessions were elevated for LSA issuance. Pointing to a pick-up in expected volumes, and a notable one, we saw several new mandates emerge on the day led by sovereigns in the shape of the Grand Duchy of Luxembourg (10yr) and Poland (7yr and 15yr). Also looking to line up a new deal, in the dollar market, is Export Finance Australia with investor calls extending to Tuesday 15th before a potential 5yr transaction
** Two covered borrowers emerged to print a combined EUR1bn total via EUR500m no grow 2028 ESG-labelled lines on Monday. While Kookmin Bank saw a 5bp compression from m/s +50a guidance and a EUR1.35bn+ final orderbook (EUR1.4bn+ peak) for its sustainability-labelled deal, NORDLB's green landed 4bp inside m/s +27a guidance (1bp NIC) and garnered enough orders to cover the deal 1.7x. DZ HYP also emerged to mandate an upcoming EUR500m no grow 6.5yr line on the day
** IG corporate issuers stayed away from the euro market on Monday despite the optimum issuance window being limited this week by the latest ECB verdict on Thursday. That said, we saw another three additions to the pipeline for this week’s business in the form of Informa plc (M&A-driven EUR 3/6/10yr three-part), TDF Infrastructure S.A.S (EUR500m no grow 7yr & tender) and Wuerth Finance (EUR500m no grow Aug 2031s) which added to three names already expected after mandates last week. Offering encouragement to those issuers, demand for last week’s EUR4.05bn of euro IG corp paper finished up at EUR17.3bn, with an average cover ratio of 4.2x recorded, showing that there is plenty of cash around for the right trade/name. See the IGM CORP SNAPSHOT for more details
** 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
Tuesday's primary prospects
Corp:
** Louis Dreyfus Company Finance B.V guaranteed by Louis Dreyfus Company B.V (BBB+ by S&P), a leading global player in agricultural commodities has mandated Citigroup, Credit Agricole CIB, JP Morgan and Mizuho to arrange a series of European fixed income investor calls commencing 14-Oct. A EUR500m (exp) 7yr fixed rate senior unsecured bond transaction will follow. The bond is expected to be rated BBB+ by S&P. The net proceeds of the issue of the bonds will be applied for general corporate purposes of the group, investments in accordance with the group’s investment strategy and refinancing of existing indebtedness
** TDF Infrastructure S.A.S (BBB-), a provider of mission critical infrastructure for wireless telecommunications, internet service providers and broadcasters in France, whose parent company is Tivana France Holdings S.A.S, has mandated Societe Generale and MUFG as Global Coordinators, and BNP Paribas, Credit Agricole CIB and Mediobanca as Active Bookrunners, to arrange a series of fixed income investor calls from 14-Oct. A new EUR500m no grow 7yr senior unsecured fixed bond is to follow. TDF Infrastructure S.A.S has separately announced a tender offer on its outstanding EUR650m 2.5% notes due Apr 2026 (FR0013144201)
Covered:
** Kreissparkasse Ludwigsburg mandated DekaBank, Erste Group and LBBW as Joint Lead Managers for its inaugural EUR250m no grow 5yr Mortgage Covered Bond (Hypothekenpfandbrief). The notes are expected to be rated AA+ by Fitch
** DZ HYP AG mandated ABN AMRO, Barclays, DZ BANK, LBBW, Natixis, UniCredit to lead manage its forthcoming EUR500m no grow 6.5yr Public Sector Covered Bond. The issue is expected to be rated Aaa/AAA by Moody's/S&P
SSA:
** The State Treasury of the Republic of Poland (A2/A-/A-) mandated Commerzbank, ING, J.P. Morgan and Societe Generale as Joint Bookrunners for a dual-tranche EUR 7yr and 15yr benchmark transaction
** The Grand Duchy of Luxembourg (Aaa/AAA/AAA) hired BARCLAYS, BCEE, BGL BNP PARIBAS, BIL and HSBC as Joint Lead Managers for its upcoming new EUR 10yr senior fixed rate benchmark
** Tokyo Metropolitan Government (A+) hired Goldman Sachs International, Citi (Sustainability Structuring Agent), Morgan Stanley and BNP PARIBAS as Joint Lead Managers to arrange a series of fixed income investor conference calls commencing 8-Oct. A EUR300m (exp) 3yr or 5yr senior unsecured fixed rate sustainability bond transaction may follow
HY:
** SIG plc mandated HSBC (B&D) as Sole Global Coordinator and Sole Physical Bookrunner and Barclays, BNP Paribas, Lloyds, NatWest as Joint Bookrunners for a EUR300m 5NC2 Senior Secured Notes, exp ratings B3 / B
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Monday's broader market developments
** European stocks traded sideways for much of the day but found a trickle of positivity around mid-afternoon leading to a ca. 0.45% gain. The ECB rate decision looms large and perhaps more importantly for asset price direction in the near term, banks (Citi, GS and BofA) are due to update investors Tuesday (marking an increase in the pace of earnings releases). The market will be looking for signs of the impact of falling rates on bank profits and for any info regarding where banks see the economy heading
** Stoxx600: Mini spike (+0.47%) in the afternoon led by IT and Utilities. Real estate and Consumer discretionary the laggards but losses for luxury heavyweights LVMH and Kering were pared as the day progressed although they remained amongst the worst performers
** Govvies: GER curve modestly flatter (2yr +2.5bp) but with Italy outperforming (0 to -2bp across the curve, front end outperforming). French spreads mirrored GER despite the rating outlook change to negative by Fitch last Friday. Gilts underperformed, particularly in the belly (10yr +3.7bp)
** Data:
- CH Sep Imports/Exports both lower than expected (2.4% vs 6.0% f/c / 0.3% vs 0.8% f/c). Trade balance fell to USD81.71bn (exp 90.5)
What to watch Tuesday
** Key Data: UK Aug ILO Unemployment Rate (07:00), UK Aug Average Weekly Earnings (07:00), UK Sep Payrolled Employees Monthly Change (07:00), FR Sep F CPI (07:45), SP Sep F CPI (08:00), GE Oct ZEW Survey (10:00), EC Aug Industrial Production (10:00) and US Oct Empire Manufacturing (13:30)
** Key Events: ECB Bank Lending Survey (09:00). ECB’s Nagel (07:15) speaks, along with Fed’s Daly (16:30) & Kugler (18:00)
** Auctions: UK to sell GBP2.25bn 2054 Gilts (10:00)
** Earnings: 2 Stoxx600 & 13 S&P500 companies report. Latter includes BofA, Citigroup & Goldman Sachs