“The issue is that it remains unclear at what time we will actually know who has won the election, but there are certainly at least two or three names looking at the market for Wednesday,” said one FIG banker.
“In theory, issuers would want to see a day or two of stability before hitting the primary market, but in reality, if there is a good enough backdrop, banks will want to take advantage of it.”
Some market participants predicted a victory for Democratic Party candidate Hillary Clinton would trigger a large rally in risk assets, while others maintain it would simply ensure secondary market stability.
Either way FIG issuers would be relieved to have avoided a win for Republican nominee Donald Trump, which fixed income experts near unanimously agree would trigger serious volatility and could shut primary markets for at least a week.
Syndicate bankers have urged issuers who need funding or capital to get on with issuing it in November, ahead of an important referendum in Italy on December 4 and a likely US interest rate rise on December 14.
So far this week only and ING DiBa and Lloyds have printed new transactions, with the latter avoiding any execution risk by issuing new holding company level senior debt as part of a liability management exercise.
The UK lender priced a €638.865m five year holding company bond at mid-swaps plus 80bp, and a €777.802m seven year holdco bond at mid-swaps plus 90bp after completing an exchange offer.
Lloyds accepted submissions to exchange eight of its operating company level euro-denominated senior bonds for the new holdco issues, securing slightly larger sizes for the new bonds than the aggregate principal submissions recorded in the exchange results published on Monday.
Elsewhere, investors have largely remained inactive this week. One investor said that given political risks and the growth of populism worldwide, there was little rationale for strong directional views in portfolio management.
His views fed into quieter trading sessions in terms of volumes, with most investors were positioned ahead of the election. Additional tier one (AT1) debt outperformed on the back of the limited flows, but the movement in spreads on senior bonds was minimal.
National Australia Bank’s recent 0.625% €500m seven year bond was quoted 2bp tight of reoffer on Tuesday morning, while SpareBank 1 SR Bank’s 0.375% €500m 5.25 year was 3bp tighter. Both bonds were flat to Monday’s trading levels.