%VENûTHOUGHû*0û-ORGANûANNOUNCEDûITSû
bond offering late, at around noon New York
time, it was the only one able to tighten
THROUGHûPRICEûPROGRESSIONû4HEûSPREADûMOVEDû
in by just 10bp on a US$2.5bn 11-year non-
CALLûûTHATûPRICEDûATûBPûOVERû4REASURIES
Citigroup’s US$1.5bn 21-year non-call 20
and MetLife’s US$1bn 10-year each priced at
BPûOVER ûWHILEû-ORGANû3TANLEYSû53BNû
YEARûNON
CALLûûLANDEDûATûBPûOVER
!TûTHOSEûLEVELS ûISSUERSûWEREûGIVINGûUPû
BETWEENûBPûANDûBPûOFûNEWûISSUEû
concession, according to IFR calculations.
h%VENûTHOUGHûTHEREûHAVEûBEENûSTRONGû
order books, I think issuers are wary of trying
TOûLEVERAGEûTHOSEûORDERûBOOKSûINTOûANYûREALû
pricing power to get tighter because there is
THISûSENSEûTHAT ûWITHûTHEûVOLATILITYûINûEQUITIES û
rates and illiquidity throughout most of the
)'ûSECTOR ûPRICINGûLEVERAGEûISûLIMITEDû
anyways,” one lead syndicate banker said.
h4HEREûISûAûREALISATIONûTHATûSPREADSûHAVEû
gapped so much wider so quickly that 5bp–
10bp of tightening is potentially penny-wise
and pound-foolish.”PRICE DISCOVERY
There were three reasons banks were
COMINGûBACKûTOûTHEûMARKET ûSAIDû$AVIDû
Knutson, head of credit research for the
Americas at Schroders.
4HEûlRSTûWASûPRICEûDISCOVERYûFORûTHEû
lNANCIALûSECTORSûOWNûBONDSûBECAUSEûTHEREû
HADûBEENûAûLOTûOFûMOVEMENTûINûJUSTûTWOûDAYS
Morgan Stanley on Thursday priced a
US$2bn 31-year non-call 30
lXED
TO
mOATING
RATEûNOTEûATûBPûOVERû
4REASURIESûFORûAûûCOUPON
By comparison, on Tuesday, Bank of
America priced a US$3bn bond in the same
FORMATûTHATûLANDEDûWITHûAûBPûSPREADûFORûAû
4.083% coupon – 1.5% lower than Morgan
3TANLEYûWASûABLEûTOûACHIEVEûJUSTûTWOûDAYSû
later.
h0RICEûDISCOVERYûDURINGûPERIODSûOFûHIGHû
VOLATILITYûISûVERYûDIFlCULT vû+NUTSONûSAID
“Nobody wants to buy something or sell
SOMETHING ûONLYûTOûlNDûITûWASûAûBADû
PURCHASEûORûAûBADûSALEûlVEûMINUTESûLATERv
The second reason for banks returning
was to open the market for clients that want
to sell bonds, term out debt and borrow to
bridge the gap to the other side of this
VOLATILITY
High-quality bank issuers were similarly
AMONGûTHEûlRSTûTOûOPENûTHEûMARKETûAFTERûTHEû
ûlNANCIALûCRISIS
Finally, Knutson said there may be some
coordination on the part of the banks
spurred by regulators wanting to see if the
primary market is broken.
If these deals did not go through, it would
mean the primary market is broken and the
&EDERALû2ESERVEûWOULDûHAVEûTOûSTEPûINûFASTERû
to buy corporate bonds.“If you can’t fund some of the biggest,
STRONGESTûCREDITSûATûANûEFlCIENTûPRICE ûTHENû
there is no hope for the small-to-medium
ENTERPRISESûTHATûEVERYONEûRECOGNISESûAREû
TRULYûATûRISKûASûAûRESULTûOFûTHEûCORONAVIRUS vû
Knutson said.BANK OF AMERICA TESTS DEMANDBANK OF AMERICA returned to the primary
market last Tuesday, raising US$3bn with a
YEARûNON
CALLûûBONDûINûAûTESTûOFûINVESTORû
APPETITEûFORûBANKûPAPERûASûVOLATILITYû
continued to roil sentiment.
Banks are no longer at the epicentre of
market concerns – as they were during the
global credit crisis in 2008 – but
demonstrating an ability to access funding
REMAINSûIMPORTANTûFORûTHEûSECTOR ûEVENûIFûITû
comes at higher concessions.
“As soon as the market opens up, the
BANKSûCOMEûBACK vûONEûINVESTORûFOCUSEDûONû
53ûlNANCIALSûSAID
“They would much rather demonstrate
THATûTHEYûCANûFUNDûEVENûIFûTHEYûPRINTûATû
WIDERûLEVELSv
Indeed, Bank of America only managed to
tighten pricing 15bp before landing the sole-
LEDûlXED
TO
mOATINGûDEALûATûBPûOVERûONûAû
day that saw Treasury yields snap higher
after the Fed announced plans to support
the commercial paper market.Not only did that equate to an approximately
BPûCONCESSIONûTOûITSûCURVEûBUTûITûWASûAûFARûCRYû
FROMûTHEûBPûOVERûITûACHIEVEDûWHENûITû
printed a similarly structured 2050 bond
almost exactly a year ago.
%VENûSO ûITûACHIEVEDûAûCOUPONûOFûûnû
inside the 4.33% on the 2050 – thanks to
WHATûREMAINSûANûULTRA
TIGHTû4REASURYûCURVE û
EVENûAFTERûBIDûYIELDSûONûTHEû
YEARûHITû
ûONû4UESDAY ûUPûFROMû-ONDAYSû
close of 1.324%.
!LTHOUGHûBANKûRESERVESûAREûCURRENTLYû
being tested amid a liquidity crunch, most
market participants feel the economic
REFORMSûAFTERûTHEûLASTûlNANCIALûCRISISûAREû
holding up well under the stress.
“The consensus is that this time around
the banks are not the epicentre of the
PROBLEM vûTHEûINVESTORûSAID
h7EVEûSEENûSPREADSûMOVEûWIDERûWITHû
general market performance but not much
deterioration beyond that.”
!VERAGEûBANKûCREDITûSPREADSûONû4UESDAYû
WEREûATûNEWûFOUR
YEARûHIGHSûOFûBPûOVERû
Treasuries, almost exactly in line with
AVERAGEûHIGH
GRADEûCREDITûSPREADSûOFûBPû
OVER ûACCORDINGûTOû)#%û"OF!ûDATA
Bank spreads really blew out to start the
WEEK ûMOVINGûBPûWIDERûONû-ONDAYûASû
concerns about companies drawing down
credit lines put banks under heightened
pressure.International Financing Review March 21 2020 33BONDS FIGALL FINANCIAL INSTITUTION BONDS IN EUROS
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues €(m) (%)Including banks, insurance companies and finance companies. Excluding
equity-related and covered bonds. Excluding publicly owned institutions.
Source: Refinitiv SDC code: N111 Credit Agricole 20 6,237.50 11.3
2 SG 13 4,607.78 8.4
3 Deutsche Bank 18 4,563.80 8.3
4 BNP Paribas 17 4,180.13 7.6
5 JP Morgan 16 3,731.90 6.8
6 Natixis 8 3,331.99 6.1
7 Barclays 16 2,372.42 4.3
8 Santander 14 2,231.09 4.1
9 HSBC 12 2,093.03 3.8
10 Credit Suisse 10 2,067.77 3.8
Total 78 55,049.61ALL SUBORDINATED FINANCIAL INSTITUTION
BONDS (ALL CURRENCIES)
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)Source: Refinitiv SDC code: J3a1 Citigroup 9 1,903.52 13.9
2 Credit Agricole 3 1,690.02 12.3
3 HSBC 6 1,117.15 8.1
4 Goldman Sachs 5 934.14 6.8
5 BofA Securities 4 892.89 6.5
6 BNP Paribas 4 809.35 5.9
7 JP Morgan 4 773.59 5.6
8 Barclays 5 690.53 5.0
9 Morgan Stanley 4 651.08 4.7
10 UBS 3 508.46 3.7
Total 15 13,727.26ALL GLOBAL AND EUROMARKET YEN BONDS
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues ¥(m) (%)Excluding equity-related debt. Including preferreds.(^) Source: Refinitiv SDC code: K10
1 Morgan Stanley 2 27,333.33 23.0
2 Sumitomo Mitsui 2 27,333.33 23.0
3 Mizuho 2 27,333.33 23.0
4 Credit Agricole 2 11,750.00 9.9
5 Nomura 1 8,333.33 7.0
6 SG 1 8,333.33 7.0
7 Daiwa Securities 1 8,333.33 7.0
Total 4 118,750.00
ALL INTERNATIONAL YEN BONDS
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues ¥(m) (%)
Including all Euro, foreign and global issues. Excluding equity-related
debt.
Source: Refinitiv SDC code: K12
1 Sumitomo Mitsui 5 88,233.33 49.1
2 Morgan Stanley 2 27,333.33 15.2
3 Mizuho 2 27,333.33 15.2
4 Credit Agricole 2 11,750.00 6.5
5 Nomura 1 8,333.33 4.6
6 Daiwa Securities 1 8,333.33 4.6
7 SG 1 8,333.33 4.6
Total 7 179,650.00
6 IFR Bonds 2325 p 23 - 45 .indd 33 20 / 03 / 2020 19 : 59 : 40