FIG WEEKLY: French and UK issuers return

With seasonal factors and earnings blackouts taking a stronger grip, the pace of non-covered supply eased this week to EUR5.0bn from last week's unexpectedly elevated EUR8.05bn total. While a slower week was anticipated, we did, however, manage to top the EUR4bn average guess.

As one would expect of a summer week which comprised an ECB policy meeting, all of this week's supply was priced within a three-day (Mon-Wed) window with issuers staying on the sidelines for the remainder of the week and Friday throwing the additional curve ball of a global IT outage.

Buy what you can, when you can

Providing some comfort for any issuers still considering a summer funding foray, what did emerge this week was well supported by investors who evidently remain keen to put cash to work.

The latter would seem slightly at odds with the more cautious tone which held sway this week although it's likely that investors with cash were incentivised to buy into the latest batch of deals given that opportunities in the primary market could be few and far between in the coming weeks.

Indeed, if the 2023 experience is any guide, investors can expect pickings in the next few weeks to be very slim where the five weeks from mid-July produced a combined total of just EUR3.65bn in non-covered euro bank paper (an average of just EUR0.73bn per week) before supply ramped up again in late August.

With that, this week's issuers had little trouble finding demand from buyers who submitted orders totalling EUR13.2bn for the EUR5.0bn amount raised.

The solid demand seen for this week's deals looks less surprising though when one considers that last week's EUR8.05bn in new paper was underpinned by very hefty demand worth more than EUR28.3bn.

If there was a nod to the more fragile tone this week it was perhaps in terms of pricing where the average NIC rose to 6.83bps (last week 0.125bp) although that observation needs to be considered in the context of this week's relatively small sample of deals.

Whatever the case, an average cover ratio of 2.84x, hardly speaks to a market that is short of buyers.

French and UK borrowers return

Getting the ball rolling on Monday, Wells Fargo delivered EUR2.75bn of the week's anticipated EUR4bn worth of supply in the asset class. The US bank did that with what marked its first euro sale in over four years in the form of a two-part EUR1.25bn 4NC3 FRN & EUR1.5bn 8NC7 FIX-FRN senior on books that finished at EUR1.5bn & EUR3.5bn respectively. That was a better demand outcome than seen for the prior sale of US bank paper on 3rd June when JPMorgan priced EUR500m and EUR1.25bn 4NC3 FRN and FIX-to-FRN lines into respective books of EUR1.3bn & EUR2.3bn.

Following on Tuesday, two banks raised EUR1.25bn via no grow SNP deals on plentiful demand worth EUR5.7bn. Taking an opportunistic approach, well-regarded issuer Credit Agricole trimmed 32.5bps off the mid-point of IPTs to price a EUR750m 6.5NC5.5 social SNP into a hefty EUR4bn book. The borrower is no stranger to jumbo demand though with its two prior SNP lines launched in February and November having amassed respective books worth EUR5.7bn and EUR6bn.

And emerging from the pipeline, Hamburg Commercial Bank AG priced a LM driven EUR500m 4yr some 30bps inside its m/s +210 area starting point into ample books of EUR1.7bn.

Wednesday's session saw the FIG market reopen for UK lenders where a EUR1bn (from bmk) 8NC7 SNP from Nationwide Building Society marked the first UK bank supply since May 23rd and pulled in a EUR2.5bn+ final book. It was Nationwide's first SNP sale since 2018.

Summary of this week's EUR supply

Next week's prospects

The pace of earnings releases ramps up (155 members of the Stoxx600 index report, of which 9 are banks) and can be expected to provide a key driver of sentiment, while also releasing more issuers from blackout.

Given the obvious seasonal factors in play, just how many choose to act is doubtful though.

The combination of uninvested cash and light supply could help to support secondary paper or insulate markets if the current bout of fragility persists or morphs into a more meaningful correction, although that remains to be seen.

Performance tracker of recent EUR benchmark deals

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