The corporate market continued to hog the limelight on Thursday where three more IG rated issuers took another EUR2.75bn out of the market via four separate transactions, commanding over EUR7.6bn of combined orders in the process.
And if the size of demand was the main barometer used to determine success then the stand out deal of the day would be the EUR500m no grow Nov 2021 line from French consultant and technology group Cap Gemini (BBB stable by S&P) which was more than 6 times subscribed.
The EUR3.3bn+ order book paved the way for a m/s +52bps reoffer which was squeezed in from +70 area IPTs leading to a modest NIC of just 2-3bps.
Elsewhere, RCI Banque SA (Baa1/BBB) refreshed its 5yr curve with a new Nov 2021 line at m/s +60, from +70/+75 IPTs on more than EUR1.8bn of demand, while BASF Finance Europe BV (A1/A) built a book of EUR2.5bn+ for its 2-part exercise, allowing the EUR1bn Nov 2020 tranche to price at m/s +15bps while the EUR500m Nov 2026 came in at m/s +33bps.
This was skewed in favour of the shorter-dated tranche which was not only reflected by the final issue sizes but also the fact that the 4yr managed to price 10bps inside the tight-end of IPTs while the 10yr only managed to print 2bps inside IPTs despite the smaller issue size.
This after both tranches offered new issue premiums of around 11-12bps at the outset. That deal also performed, bid 2bps tighter after pricing.
This preference for shorter dated paper reflected the overall composition of Thursday's corporate issuance and follows the recent rise in underlying yields which has made returns in this part of the curve more enticing for investors.
This has been exacerbated by recent broader market volatility which has accentuated the allure of the shorter-end of the corporate curve which provides something of a safe haven while also offering a decent pick-up versus EU government bonds. ECB eligibility also offers potential for performance, as was the case with Thursday's trio of deals.
FIG sector sees first Euro supply of the week
Away from the corporates, the other primary highlight was provided by Norway's Sparebank 1 SR-Bank ASA (A1/A-) which brought a new long 5yr senior benchmark (due Feb 2022), its first senior benchmark in EUR since April 2014.
Books opened at m/s +low 50s IPTs although ~EUR900m of demand from ~115 accounts was sufficient for the group to print EUR500m at m/s +45, taking Thursday's total IG supply in the single currency to EUR3.25bn.
Pre-payroll supply a possibility
Turning to Friday's supply prospects, and it wouldn't be unheard of for another deal or two to get done ahead of the weekend despite Friday's US payrolls report which as recent history shows no longer necessarily keeps a complete lid on supply as it often did in the past.
Having come back to life on Thursday, the FIG sector could see more supply after National Australia Bank mandated CS and NAB as global coordinators for a dual tranche 7yr senior Euro (Aa2/AA-/AA-) and 5yr GBP covered (Aaa/AAA) deal.
On the Euro leg, the issuer sold a 10yr line earlier this year (1.25% 05/2026) and a 7yr last year (0.875% 01/2022) and interpolating current levels on those lines would point to fair value on a new 7yr in the m/s +low 30s.
On the GBP, NAB's last and only fixed rate sterling covered issuance to date came back in August 2012, when GBP250m was taken out of the market via a Sep-2026 line. That deal is now seen bid around UKT+58bp according to screen levels after pricing at UKT+120bp.
One issuer that did not materialise with its planned deal on Thursday and could make a charge is LyondellBasell Industries N.V (Baa1/BBB) which decided not to pull the trigger on its EUR 12yr deal which it canvassed to investors during a call Wednesday morning.
That decision may well have had something to do with the heightened political risk and the slide in global oil prices which have weighed on risk market sentiment of late, while as noted above this maturity may not be at the top of every investor's shopping list in the current environment.
Still, whatever happens Friday, with the weekly total standing at EUR8.55 (IG and HY), this week is going to fall well short of last week's very impressive total of EUR38.042bn which was more than double the amount sold the week prior.
Risk bounce fades
The broader market picture was looking a little bit rosier this session as risk bulls retained the upper hand after the UK High Court ruled that a Parliamentary vote is required to invoke Article 50 (Brexit).
That combined with some initial stability in global oil prices was sufficient to propel EU stocks higher and the synthetic credit indices tighter, although the bounce in oil prices lacked conviction with Brent Crude back down 0.36% at the time of writing (15:53 GMT).
This also saw regional stocks pare earlier gains with EuroStoxx50 back to around flat on the day going in to the close, although synthetic credit indices proved a bit more resilient with the iTraxx Main 0.97 at 74.99, and the Crossover -4.10 at 335.54.
Looking ahead to Friday's event risk
Aside from those who have already flagged their intentions, would-be borrowers could take a back seat tomorrow with looming event risk in the shape of US Non-Farm Payrolls, the key highlight of the day, estimated at 175k in Oct from 156k previously.
In Europe, it's Services PMI day although if the little reaction to Wednesday's Manufacturing PMI is any guide, expect a repeat performance as uncertainty over the upcoming US Presidential election continues to dominate and keeps market volatility elevated. For the record though, the pan-EZ version is seen matching the flash estimate at 53.5 in Oct from 52.2 previously.
Aside from the aforementioned NFP release, the US also reports trade deficit figures for Sep.
Central bank speakers consist of BoE's Forbes, ECB's Constancio and Angeloni, and Fed's Lockhart, Kaplan and Fischer.
There are no significant term auctions scheduled in Europe or US on Friday, while earnings trickle down to 14 Stoxx600 and 11 S&P500 companies.
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