DAILY CLOSE: Mecklenburg-Western Pomerania set to go Wednesday
** European bond issuers stayed away from the market Tuesday, but there was a bit of movement in the pipeline as the German Federal State of Mecklenburg-Western Pomerania mandated leads for a EUR500m 9yr LSA (more in next bullet). That could come as early as Wednesday’s business and would add to Monday’s EUR500m 3yr FRN from compatriot Mercedes-Benz which is the only other deal to price so far this week
** In SSAs there have been no deals in euros since the 18th July, when Rhineland-Palatinate placed a EUR500m 7yr LSA. There is no real no surprise either that we will see the market tested on Wednesday by another LSA transaction, this time from similarly infrequent issuer Land Mecklenburg-Vorpommern which has opted for a 9yr tenor. They have been seen in the EUR market twice already in 2024, bringing an 8yr in January and a 10yr in May. The latter was just 0.72x covered compared to their inaugural deal of the year which saw a much healthier cover ratio of 1.6x
** IG corporate names were back to the sidelines on Tuesday after German automaker Mercedes-Benz priced Monday’s only trade. As a reminder, that came in the form of a 3yr floating-rate issue which was announced as EUR500m in size at a spread of 3mE+48 from the get-go and likely driven by a big anchor/reverse enquiry order. It's unlikely we will see much in the way of meaningful supply until next week when more market participants return from their summer vacations
Wednesday's supply prospects
SSA:
** The German Federal State of Mecklenburg-Western Pomerania (AAA) mandated BayernLB, Commerzbank, DekaBank, Deutsche Bank, DZ BANK and NORD/LB to lead manage its upcoming EUR500m no grow 9yr Landesschatzanweisung
Covered:
** Bendigo and Adelaide Bank Limited (A-/A-/Baa1) hired Barclays, Natixis and UBS Investment Bank on a EUR Long 5y Reg S (Bearer form) Soft Bullet Covered Bond transaction, backed by prime Australian residential mortgages. The Covered Bond is guaranteed by Perpetual Corporate Trust Limited and is expected to be rated AAA/Aaa
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Tuesday's broader market developments
** EU stocks pared early gains as German sentiment data came in weak but subsequently got renewed support as Wall Street rallied on tame US PPI which pulled US (and EU) yields lower. German Aug ZEW Expectations index was a big miss at 19.2 (f/c 34.0, prev 41.8) - the lowest since Jan
** Stoxx600 gained as much as 0.45%. Utilities outperformed
** Govvies: EGB yields pulled lower by a fall in UST yields. Auction supply from Germany and the UK comfortably absorbed
** Data:
- UK Jun ILO Unemployment Rate fell more than exp to 4.2% (f/c 4.5%, prev 4.4%)
- UK Jun Average Weekly Earnings (ex-bonus) as exp at 5.4% (prev rev to 5.8% from 5.7%)
- UK Jul Payrolled Employees Monthly Change higher than exp at 24k (f/c 10k, prev rev to 14k from 16k)
- GE Aug ZEW Expectations missed at 19.2 (f/c 34.0, prev 41.8)
- US Jul PPI Final Demand MoM below f/c at 0.1% (exp & prev 0.2%), Core also below f/c at 0.0% (exp 0.2%, prev rev to 0.3%)
What to watch Wednesday
** Key Data: UK Jul CPI (07:00), UK Jul CPI Core (07:00), UK Jul RPI (07:00), FR Jul F CPI EU Harmonized (07:45), FR Jul F CPI (07:45), UK Jun House Price Index (09:30), EC Q2 P GDP (10:00), EC Q2 P Employment (10:00), EC Jun Industrial Production (10:00), US Weekly MBA Mortgage Applications (12:00), US Jul CPI (13:30), US Jul CPI Core Index (13:30)
** Key Events: There are no key events / speakers scheduled for 14th Aug
** Government Auctions: France to sell up to EUR9bn 2027, 2029, 2030 and 2031 bonds (09:50), as well as up to EUR2bn 2029, 2036 OATi, 2036 OATei and 2053 Linkers (10:50). Germany to sell EUR2bn 2050 and 2054 bonds (10:30)
** Earnings: 15 Stoxx600 and 2 S&P500 companies release results
All times BST
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