Senior bank debt issuers drew sizeable demand for their transactions on Monday, brushing aside possible concerns around how much the January glut of supply could have weighed on the market.
One banker found it amazing that issuers were still getting strong deals done in the sector, considering the heavy senior supply the market has witnessed so far and how far spreads have tightened.
With only one day to go and excluding Monday's deals, the month's volume from financial issuers in the single currency is €51.15bn, an almost 100% increase versus January 2022. Yet, despite the relentless pace, the iboxx euro bank senior bail-in index has tightened 26bp to 122bp since the start of the year while the iboxx euro banks senior preferred has moved 15bp tighter to 90bp.
“The senior space is still in shape. If you compare new issue premiums from senior unsecured to Tier 2s or covereds, it’s nearly the same,” a second banker said. “It seems the [pricing] levels are right and investors like to digest these issues, otherwise we wouldn’t see these type of books.”
Deutsche Pfandbriefbank had a final book of €1.8bn for a €500m four-year green senior preferred.
Commerzbank, Danske Bank, DekaBank, HSBC and UniCredit marketed the no-grow trade at plus 240bp area, an attractive start considering fair value stood within 200bp-205bp.
They tightened pricing to 215bp, on more than €1.4bn in orders – leads interest excluded.
"The dynamics of the books went quite well, especially when they fixed the spread, that created more momentum," a third banker said. "It's a far better outcome [than that of their covered bond at the onset of the month]. A positive surprise, that's what they had to deliver."
SEB was also in the market, landing a twice subscribed €1bn five-year senior non-preferred.
“It’s gone very well, better than we expected,” a fourth banker said. “After all, this is still a bulletproof jurisdiction and a bulletproof name. If you want one of the best in class, this is it.”
BNP Paribas, Citigroup, JP Morgan, SEB and UBS opened books at mid-swaps plus 110bp area for a benchmark size trade. Market participants gauged fair value within a mid to high 70s bracket.
With the orders peaking at €2.2bn, the final spread was set at 85bp - some 130bp below PBB. The leads subsequently printed a €1bn size with some book attrition. It closed over €1.8bn.
Positive sign for the periphery
In addition, Amco returned to the market after four months with a €500m four-year senior unsecured trade that had books over €1.85bn.
“A very successful trade, even more so if you compare it to the deal they did in September,” a fifth banker said adding that it had paid a negative new issue premium.
Last September Amco conceded 28bp on a €500m 4.375% March 2026 deal that attracted over €900m in orders.
Equita, Mediobanca, Morgan Stanley, Societe Generale and UniCredit marketed Monday's no-grow trade at 160bp area over the January 2027 BTP, landing it at 125bp.
“A significant tightening of 35bp, it’s one of the largest ones we’ve seen. It priced around 5bp inside the estimated fair value,” the fifth banked said, adding that the outcome showed Amco is now becoming a well-established issuer on the primary market.
“It didn’t use to be a frequent issuer compared to other SSA-related names in Italy but it now has a consolidated and well-diversified investor base. There’s substantial participation from non-domestic accounts in the new trade."
The deal sends a positive message for peripheral Europe supply, at least for issuers that are not in blackout.
“On the one hand, if you can issue right now, go ahead because the market is not as crowded as it was in the previous weeks, but on the other, you have to consider that this week is tricky and pretty short because starting from Wednesday, we have so many market data releases and central bank meetings,” the fifth banker said.
Next in line is BayernLB which is preparing a €500m no-grow six-year green SNP transaction with BayernLB, Erste, ING, Natixis and UniCredit acting as bookrunners.