Six banks raced into the euro senior unsecured market on Monday as issuers sought to capitalise on a positive tone that held from the end of last week, with one eye on holidays and central bank meetings just over the horizon.
A fast-paced start to the week had been forecast, with supply set to be front-loaded into the first three days, before some European countries mark Corpus Christi with public holidays on Thursday. Some bankers suggested that as much as €20bn of FIG issuance could be squeezed into that three-day window, with market participants also mindful that next week attention will shift to US CPI figures and Federal Reserve and European Central Bank meetings.
In total, banks issued €6.85bn in the single currency on Monday, with issuers also active in the sterling and US dollar markets as they sought to make further progress towards their 2023 funding targets before the summer break.
"The chatter we're getting now is that issuers are 60% or 65% done versus their requirements, but you have to remember that in the second half there's not that many good days where you can do deals, and to me 2024 looks riskier than 2023 with the US elections," said a syndicate banker.
After issuance plans were disrupted by a global bank sell-off in March, bankers said that strong supply could continue well into July and potentially restart relatively early in August – as it did last year. But they noted there will be relatively few actionable issuance days available this month.
"I think we will get quite front-loaded, busy periods and then a bit of calm when there are holidays, data readings or central bank meetings. That will continue," said a DCM banker.
"This year has been tricky, so I suspect a lot of issuers would like to get well ahead of the curve if they can. If [some issuers] could be 100% done by July, then I'm sure people would take that option. There are some big risks out there and are spreads going to get any tighter? Probably not."
For now, market conditions are highly conducive on the back of a deal being reached in the US to avert a government default and strong nonfarm payrolls figures last week, and bankers said that was evident in the response to Monday's FIG offerings.
Go long
BPCE took advantage of the risk-on tone to push out its senior non-preferred curve with an 11-year non-call 10 transaction.
The French issuer's deal is only the second 11NC10 euro benchmark SNP or holdco senior issuance of 2023, following a €1.5bn holdco senior from ING on May 15. No issuer has ventured further out the SNP/holdco senior curve in the single currency so far this year.
Sole lead Natixis marketed the deal with initial price thoughts of mid-swaps plus 210bp area. The spread was set at 183bp and the size at €750m, on the back of more than €2.4bn of demand (pre-rec).
Bankers said the deal uncovered strong demand for duration but were hesitant to predict that many other banks will follow BPCE into the long end.
Bank of America also stood out from the crowd as it issued a five-year green holdco senior that is only the second euro benchmark deal of the year from a US bank, after Morgan Stanley sold a €2bn holdco senior in February.
Bankers said the deal comes after a favourable shift in the cross-currency basis swap has made euro issuance more attractive to US issuers.
The self-led deal was first shown to investors with IPTs set at 140bp area. Bank of America went on to raise €1bn at 105bp.
After the 35bp spread revision, the order book dropped from the peak of €3.5bn-plus to €2.5bn-plus at the final count.
The market also welcomed further non-European supply from Sumitomo Mitsui Financial Group.
The Japanese bank launched a €600m seven-year holdco senior at 150bp, inside IPTs of 170bp area, via SMBC Nikko, Goldman Sachs, Barclays, HSBC and BNP Paribas. Final demand stood at around €1.3bn.
Exceeding expectations
Meanwhile, Banco Santander drew more than €1.7bn of demand to a seven-year senior preferred, allowing leads Citigroup, HSBC, IMI-Intesa Sanpaolo, ING, Santander and UBS to tighten the spread from the 150bp area IPTs to 125bp, while also setting the size at €1bn.
Bankers calculated that the Spanish bank paid a 10bp–15bp concession.
"That's at the tighter end of what we have seen on most of today's trades," said a banker at one of Santander's leads. "[The deal] marginally exceeded our expectations, especially taking the very busy market into account."
Belfius Bank brought further green bond supply in the form of a five-year senior preferred.
Leads Belfius, Morgan Stanley, Natixis, Nomura, Santander and UniCredit marketed the deal with IPTs of 110bp–115bp area, before setting the spread at 90bp and the size at €750m. The book closed above €1.5bn.
Elsewhere, Skandinaviska Enskilda Banken priced a €1.25bn two-year senior preferred FRN at three-month Euribor plus 45bp, via Goldman Sachs, JP Morgan, Natixis, SEB and UBS.
"It feels like there's appetite for everything ... but you do still need diligence and new issue premiums are definitely not at the tights," said the DCM banker. "You need to be careful about your timing and execution strategy."