Volvo printed the first euro high-grade corporate deal in around a month on Monday, setting a positive tone for other transactions to follow after the summer period.
The Swedish truck manufacturer (A2/A, Moody's/S&P) managed to raise the sizeable amount of €700m through a three-year bond that was covered almost three times when the order book was at its peak. The deal offered just 5bp–10bp in new issue premium after landing at mid-swaps plus 40bp, inside initial price thoughts of 65bp–70bp.
"It's a defensive trade with a short tenor that can pretty much come any day in the year. But it's coming after a super, super-quiet period, so even a premium of 10bp would be a good outcome," said a syndicate banker away from the deal.
There has been some sterling supply during the late July-to-August period but the last investment-grade corporate primary deal in euros was on July 20, when DS Smith raised €1.5bn from a two-tranche green bond.
While bankers had been expecting sales to pick up pace starting this week after the summer holidays, Volvo's trade comes amid a mixed picture on risk tone that may have dented issuance. European shares have recovered somewhat from a rout last week on worries around China's economy, but bond yields renewed their rise, with three-year mid-swaps hovering above 3.5% after peaking at close to 3.6% last week on expectations that interest rates will remain higher for longer. That rate started the month below 3.5%.
"We could have had more trades if we had a more stable [rates] environment," said the banker. "There are a good number of issuers ready but there is no need for them to rush in August if the market's not there."
Even with up to 30bp tightening from IPTs, there was little attrition in Volvo's book, which remained over €1.8bn. BNP Paribas, Bank of America, Deutsche Bank and SEB were the leads.
Comparables for the senior unsecured August 2026s, issued through Volvo Treasury, included the issuer's own 0% May 2026s and 3.625% May 2027s, which were bid at 25bp and 41bp, respectively.
With handful of issuers sitting on the sidelines for potential deals to come this week or next, Volvo's trade is exactly what market participants wanted to see, said a DCM banker.
"Any supply this week would be fairly light but we will see more activity the week after, as the US market goes quiet for the Labor Day holiday on the fourth," he said.