Deutsche Bank was the sole issuer to come into the US investment-grade bond market on Tuesday, as elevated concessions and volatility in risky assets limited issuance to a drip-feed of borrowers at the start of the week.
The German bank landed a US$1.3bn four-year non-call three senior non-preferred fixed-to-floating note, after dropping a floater in a similar format. Deutsche Bank set the offering at Treasuries plus 305bp, seeing 20bp of price progression from initial marketing.
The concessions for the new notes over the bank's existing securities in the secondary market was 18bp, according to IFR calculations.
The self-led offering, rated Baa2/BBB-/BBB+, is adding to the handful of Yankee FIG bond offerings that landed this week, with Japan's Mitsubishi UFJ Financial Group and France's BPCE having raised capital on Monday.
BPCE also raised a senior non-preferred note on Monday, issuing a 11-year non-call 10 fixed-to-floating note at 277bp over Treasuries.
Deutsche Bank's offering comes as European and Japanese borrowers have had to give up elevated concessions to issue bonds in the US dollar market, considered one of the most reliable corners in global capital markets to obtain execution.
“Every bank that comes to market will need to pay up. There’s plenty of bank paper out there,” said a syndicate banker. “The Yankee concession is 20bp-25bp. That was paid by BPCE, BFCM and Nomura. Those numbers are pretty punitive."
The banker also noted there had been more pressure on the short-end of the yield curve recently. Investors who needed to free up cash from their portfolio or deal with redemptions preferred to sell their shorter-dated holdings instead of their longer-dated bonds, which were trading well below par.
“We’re seeing more investor selling on the front-end. People want to sell bonds closer to par,” he said.
Updated story: Added pricing details