Printing bonds in dollars is out of reach for many European FIG issuers at the moment, with trades costing 25bp-40bp more than their euro counterparts. Barclays showed this week that dollar issuance is possible but, unsurprisingly, other banks are going for cheaper options elsewhere.
For now, the focus for European funders is on their home market. And even then, the premiums needed to secure a new euro deal are high, with some national champion names offering as much as 25bp this week.
But the banks should not just be confined to doing deals in dollars and euros. Take the Swiss franc market, for instance. This year it has consistently delivered size and savings for foreign issuers.
Of course, if there is one bank that should be able to issue competitively in the Swiss market, it is UBS. But just this week its pair of Swiss franc operating company senior notes saved 30bp-40bp versus equivalent funding in euros with even greater arbitrage on show when compared to the bank's primary source of funding: the dollar.
Bank of Montreal last month priced a Sfr325m ($367m) five year covered bond 20bp inside where it could have come in euros.
Niche currency funding doesn’t begin and end in Switzerland either. Opportunities abound outside of Europe and the US. Again, it is a domestic name, but National Australia Bank’s record-breaking A$5.25bn ($3.5bn) deal on Thursday showed just how awash that market is with liquidity.
And for those looking for something a little different, the yen and short dated sterling markets offer alternatives to the usual benchmark funding flow.
Banks do not have long until the summer slowdown to ensure that they enter the second half of the year well advanced in their funding.
Diversifying sources of funding has always been a smart move and one that can save issuers money. With the US banking debacle rumbling on, and uncertainty hanging over capital markets, it makes even more sense than before.