Spend long enough at GlobalCapital Towers and a few repetitive themes start to emerge from conversations with syndicate bankers. Issuers, in all but the most dire conditions, would be well advised to print soon, for worse may be to come. And deals should always, always come with a “sensible” new issue premium.
Solid advice no doubt, apparently applicable to almost any market environment and well-calibrated to make a syndicate’s job a little easier.
Usually, though, markets don’t co-operate. For the past few central bank-dominated years, high grade markets have mostly been one way, with plentiful cheap money soothing investor worries. For blue chip issuers, that meant deals came at a tight price— why pay a premium when the ECB has your back?
At the end of last year though, all that changed. Everything widened, pipelines seized up, projects were postponed. Issuers that most needed to demonstrate their market access, like the small Italian banks, were locked out.
This week, though, credit markets roared to life. Corporates brought multi-tranche trades and hybrids; the FIG market saw peripheral capital sell; SSAs and covered bond issuers saw, well, a bit of everything but also some book building records smashed.
Gratifyingly, though, treasury teams weren’t taking markets for granted. Generali’s tier two started 75bp from where it priced. Auchan started 50bp back from its curve. Even covered bonds saw a stonking 20bp new issue premium, admittedly for Monte dei Paschi.
But the syndicate spring won’t last. Already, SSA and top quality covered issuers, having started their January bonanza earlier, are trying to print through their curves. Higher yielding names will follow. Enjoy it while it lasts.