Bond issuers have enjoyed a strong beginning to this year, including in the FIG unsecured market where, after a leisurely start, issuance has caught up with the pace of last year.
The opening month is set to finish with €54.4bn of FIG unsecured issuance, almost bang in line with the €53.3bn that was printed in the same spell in 2023, according to GlobalCapital’s Primary Market Monitor.
Among the success stories were French banks who proved the naysayers wrong.
Predictions that French financials would have to pay up to access the primary market in the new year turned out to be false. Instead, they garnered huge order books and paid negligible new issue premiums.
Next up, Reverse Yankee issuers stormed the euro market and raised €8.6bn, 17 times the volume of January 2024, as US banks took advantage of a favourable cross-currency basis.
Bringing a new deal to the market in January turned out to be a free lunch for investors and issuers alike.
Immediate performance in the secondary market was almost guaranteed and it became commonplace to spot a new deal trading 5bp tighter just 48 hours after pricing.
But there are signs that issuers may need to be more cautious.
Already, a big test in momentum came during the last week in January when US tech stocks tumbled, triggering a wider sell-off in global equities.
Performance in secondary bank bond markets stalled and some issuers had to rethink their approach.
Take German Landesbank BayernLB, which extended its senior non-preferred curve on Tuesday and paid up to 10bp of new issue premium — about twice the amount of similar recent deals — in order to hold the orderbook together.
It was an astute move.
Given that secondary market performance has become less of a guarantee, issuers would be wise in the near-term not to price new deals too aggressively.
Meanwhile, opportunistic borrowers may be best to sit it out until conditions becomes more conducive.