Poor performance from trades priced on Monday did not hamper deal execution in the euro investment-grade market on Tuesday, though the two corporates that emerged offered double-digits concessions to get their deals away.
French utility RTE (A, S&P) and Dutch telecom Koninklijke KPN (Baa3/BBB/BBB) both issued bonds which were relatively well covered, in contrast to a €500m September 2027 note for unrated Porsche Automobil Holding on Monday, which fell short of subscription.
"The market is okay," said a syndicate head. "New issue premiums are still a bit unpredictable but towards the higher side."
RTE's €1bn 12-year bond was covered around three times at peak demand even as the issuer raised a sizable amount for a single-tranche. Final books for KPN's €600m eight-year bond were €1.8bn via joint bookrunners ABN AMRO, BNP Paribas, Goldman Sachs, IMI-Intesa Sanpaolo and ING.
"[Investor reception on the deals] should be good in this kind of market, where investors are being very selective, as they are offering reasonable spreads," said a syndicate banker before the deals were launched.
RTE landed the July 2035s at mid-swaps plus 85bp, inside initial price thoughts of 110bp–115bp, while KPN launched its July 2031 at 98bp, inside 120bp–125bp area IPTs. Fair value was spotted at around 75bp for RTE and 85bp for KPN, according to bankers on and away from the deals.
One senior portfolio manager said primary transactions with yields of around 4% or a spread of 100bp look attractive, although spreads could easily go higher from here. "If spreads widen, say 30bp–50bp, for yields to get close to 5%, then new money will flow in and spreads will not sell off," he said.
"We are a bit cautious, though, because we don't know where spreads should naturally be in this market that is replacing the ECB with higher rates."
RTE saw some attrition with final orders settling around €2.7bn via active joint bookrunners Barclays, BNP Paribas, Credit Agricole, CIC, Natixis, NatWest Markets, SMBC and Societe Generale.
Investors are also having to grapple with some poor aftermarket performance. Porsche's September 2027s, which had final demand of €470m-plus and came as part of a €1.25bn dual-tranche offering, are quoted about 11bp wide of the plus 95bp level they priced at, according to Refinitiv.
"Porsche came quite close to its existing bonds so we thought spreads were not overly attractive and weren't in that trade," said the portfolio manager. "Last time they were in the market there was good retail participation in the secondary so maybe they got a bit too optimistic."
Porsche's bonds weren't the only ones to move wider after being made free to trade. Even a more than four-times covered €500m 10-year debut sustainability-linked bond from Deutsche Post is about 7bp wider from its plus 45bp pricing level, although a lead said it came with a negative 10bp new issue concession.
Secondary performance for the other two trades on Monday from Abertis Infraestructuras and Floene Energias, are performing better in comparison. However, Abertis was spotted a couple of basis points wider than reoffer. Floene's bond, in contrast, is 10bp tighter.