2020-04-04 IFR Magazine

46 International Financing Review April 4 2020

Leads Commerzbank, JP Morgan, Natixis and

UBS offered the deal with guidance of mid-

swaps plus 40bp area. The spread was later

lXEDûATûBPûANDûTHEûSIZEûATûõBNûWITHû

the book closing above €2.6bn.

Credit Mutuel was unable to match Credit

Agricole in terms of size or demand, with

bankers putting the difference down to the

latter’s larger investor following.

But more than 90 accounts participated in

4HURSDAYSûNEWûISSUEûCONlRMINGûTHEû

positive trend.

Investors are returning to the covered

bond market in numbers, bankers said, as

CONlDENCEûHASûBEENûBOOSTEDûBYûTHEûMANYû

central bank measures announced in recent

weeks and because covered bonds’ relative

value looks improved versus tightening

sovereigns.

A syndicate banker away from the leads

added that the comparison with Credit

Agricole’s larger trade should take nothing

away from Credit Mutuel’s deal - which is its

SECONDûLARGESTûBEHINDûONLYûAûõBNû

TRANSACTIONûISSUEDûINû

“It doesn’t change the fact this is an

amazing trade for CM,” he said. “It is the

lRSTûTIMEûTHEYVEûPRINTEDûAûSIZEûLIKEûTHISûINû

recent times, so it is impressive.”

ECB BID UNCHANGED

Among the central bank measures that

have boosted the market is the ECB’s

€750bn Pandemic Emergency Purchase

Programme.

Market participants have speculated that

the start of PEPP buying will cause the ECB

to scale up its orders for new covereds in the

primary market.

The Eurosystem reportedly increased its

participation in the corporate market

towards the end of last week.

However, it is understood the

Eurosystem’s order for last week’s deals

was around 40% of the expected deal size,

implying its behaviour in the covered

primary market is still unchanged since

the new purchases were announced.

#ENTRALûBANKSûANDûOFlCIALûINSTITUTIONSû

were allocated 40% of Credit Agricole’s deal

and 36% of Credit Mutuel’s.

EQUILIBRIUM

While primary patterns are unchanged, the

ECB has stepped up its presence in the

secondary covered bond market.

In the long term, increased ECB buying is

expected to cause covered bond spreads to

tighten, in conjunction with expected lower

supply as central bank loans reduce banks’

funding needs.

-ICHAELû3PIESûSTRATEGISTûATû#ITIGROUPû

forecasts the ECB could now buy more than

õBNûOFûCOVEREDûBONDSûTHISûYEARû

potentially exceeding new gross CBPP3-

eligible supply.

However, it has not yet arrested the

widening in covered bond spreads that

BEGANûMID

&EBRUARYû4HEûI"OXXû%52û#OVEREDû

INDEXûWIDENEDûBPûLASTûWEEKûANDûTRADEDûATû

29.5bp at Tuesday’s close, its widest level

SINCEû-ARCHû

For now, new issues in the primary

market are repricing the secondary.

“Hence, a higher spread equilibrium will

have to be found on a broad basis across all

segments before the ECB impact and some

SPREADûREVERSALûWILLûBEûSEENvûSAIDû3PIES

“An ultimate relief rally should, however,

only be expected once coronavirus becomes

a manageable threat to the economy and

society.”

NON-CORE CURRENCIES

TD BANK AND CIBC TAKE COVER

TORONTO-DOMINION BANKûRAISEDû!BNûFROMû

AûTHREE

YEARûmOATING

RATEûCOVEREDû+ANGAROOû

offering last Friday via joint leads ANZ, CBA,

NAB, TD Securities and Westpac.

Local bank balance sheets dominated

orders for the notes, which were priced in

LINEûWITHûGUIDANCEûATûTHREE

MONTHû""37û

PLUSûBP

4HISûMATCHEDûTHEûBPûMARGINûPAIDûAû

day earlier by CANADIAN IMPERIAL BANK OF

COMMERCEû3YDNEYûBRANCHûFORûAû!Mû

DOMESTICûTHREE

YEARûCOVEREDûmOATING

RATEû

note offering arranged by HSBC, NAB,

Westpac and CIBC.

#)"#û3YDNEYûPREVIOUSLYûISSUEDû!BNûOFû

THREE

YEARûCOVEREDû&2.SûLASTû*ULYûWHICHûISû

backed by Canadian mortgages and priced

ATûTHREE

MONTHû""37ûPLUSûBP

CIBC has also issued covered Kangaroos

previously with Canadian banks particularly

active participants in the Australian covered

bond market in recent years.

Beyond the four Canadian lenders – CIBC,

"ANKûOFû.OVAû3COTIAû2OYALû"ANKûOFû#ANADAû

and Toronto-Dominion – the only other

COVEREDû+ANGAROOûISSUERSûSINCEûTHEûlNANCIALû

CRISISûHAVEûBEENû3WEDISHûMORTGAGEûLENDERû

3TADSHYPOTEKû"ANKûOFû.EWû:EALANDû

.ORWAYSû$."û"OLIGKREDITTûANDû3INGAPORESû

$"3û"ANK

HIGH-YIELD

UNITED STATES

THREE ISSUERS LOOK FOR LIQUIDITY

WITH FIVE-YEAR JUNK BONDS

Three familiar names from different sectors

tapped the high-yield market on Thursday,

OFFERINGûlVE

YEARûDEBTûTOûSHOREûUPûTHEIRû

balance sheets.

All were names that have previously

enjoyed some of the best execution in the

high-yield market – hospital operator TENET

HEALTHCARE, aerospace parts manufacturer

TRANSDIGM and fast-food operator RESTAURANT

BRANDS INTERNATIONAL.

All were looking to boost cash on the

balance sheet “just in case”, given the

uncertainty related to the coronavirus

pandemic, said one investor.

The three deals followed a trade from

YUM! Brands on Monday which reopened

the high-yield market after a four-week

hiatus (see “YUM! Brands breathes life into

53ûJUNKûBONDûMARKETvûINû4OPû.EWS    

The issuance came amid a period of

relative stability in the high-yield market –

average spreads started the week at 882bp

ANDûMOVEDûTOûBPûOVERû4REASURIESûONû

Thursday, having ballooned as wide as

BPûTHEûPREVIOUSûWEEKûBEFOREûSTAGINGûAû

rally.

“The volatility and the headlines have

been exhausting in both directions,” said a

syndicate banker. “It is not conducive to

functioning capital markets when there is

that much volatility.”

“The last couple of days have been far

more stable and that is creating a more

positive narrative in high-yield.”

High-yield funds have also been

RECOVERINGûFROMûTHEûRECORDûOUTmOWSûSEENûINû

March.

,IPPERûDATAûSHOWEDûINmOWSûOFûMOREûTHANû

53BNûWHICHû*0û-ORGANûANALYSTSûSAIDû

would be the largest on record for the

sector. It followed six consecutive weeks of

OUTmOWSûINûTHEûASSETûCLASSûACCORDINGûTOû

Lipper.

To be sure, none of Thursday’s issuers

were able to borrow at the tight levels they

had been enjoying even fairly recently, with

all three highlighting coronavirus

DISRUPTIONSûTOûTHEIRûBUSINESSESûINûlLINGS

ALL COVERED BONDS (ALL CURRENCIES)

BOOKRUNNERS: 1/1/2020–31/3/2020

Managing No of Total Share

bank or group issues US$(m) (%)

Source: Refinitiv SDC code: J15a

1 Barclays 30 6,206.09 8.5

2 HSBC 24 5,411.01 7.4

3 Credit Suisse 13 3,544.52 4.8

4 BNP Paribas 15 3,382.58 4.6

5 Credit Agricole 16 3,353.94 4.6

6 Santander 14 3,226.00 4.4

7 UniCredit 18 3,134.50 4.3

8 ING 14 3,092.68 4.2

9 Natixis 15 2,981.98 4.1

10 Commerzbank 13 2,828.57 3.9

Total 84 73,229.00

6 IFR Bonds 2327 p 25 - 65 .indd 46 03 / 04 / 2020 20 : 29 : 00