The European Union reopened the euro SSA market last Tuesday with its newest syndication, ending two weeks of bare-bones supply and paving the way for a slew of issuance ahead of Easter.
With its books over €73bn, the EU’s €6bn tap of its 2.625% February 2048 green line showed the SSA market was open after the collapse of Silicon Valley Bank, which muddied conditions too much for substantial benchmark deals.
The deal was not yet priced before Berlin, Greece, the Flemish Community, NRW.Bank and Societe du Grand Paris announced their plans to follow the supranational in the single currency.
“It was highly expected [that the EU would price smoothly],” said a banker away from the deal, though he noted the volatility still posed risks. “Everybody is relieved that it has gone well.”
A good deal “was what everybody wanted”, the banker said. “That should trigger some primary issuance.”
A second banker away from the transaction agreed: the EU deal “was exactly what the market needed to restart supply”.
Leads Bank of America, Deutsche Bank, JP Morgan, Nomura and Nordea started guidance at 70bp area over mid-swaps and quickly tightened it by 2bp after buyers put in more than €58bn in orders, landing the deal at plus 68bp.
The book closed at €73bn-plus, including €3.55bn of leads' interest.
That plus 68bp level left a 2bp new issue concession the first banker away from the deal said, though the second banker put it at 3bp. That banker said the underlying bond issue was stable in the secondary market even after the tap’s mandate, a notable fact given that bonds often come under pressure when there are expectations of supply.
“In terms of cheapness to EGBs, at the moment I think it stacks up nicely – accounts see some value there,” the second banker said, commenting on the line’s secondary market performance between the mandate and execution. The green label will have aided the bond’s price, too, he said.
It also helped that cash has been built up over the last fortnight of essentially closed markets.
“We’re on the back of two weeks of very limited supply,” the second banker said. “There is cash in the system to be put to work.”