DZ Bank

A pair of European borrowers debuted socially responsible investment bonds on Monday, raising a combined €1.2bn, with one able to tighten its price by several basis points.

Rating: Aaa/AA/AAA

A flurry of activity in the market for socially responsible investments shows no sign of letting up, with two borrowers set to make their debut next week and two more waiting in the wings.

The European Union found its first deal of 2017 tough going on Monday. While the supranational managed to raise €600m with a tap of a 2031 line, the deal proved more of a challenge than expected.

Rating: Aaa/AAA/AA+

With public sector borrowers having reached advanced stages in their annual funding programmes as the first quarter comes to a close, focus is shifting to socially responsible bonds.

Buoyed by relief following a Dutch election in which Eurosceptic Geert Wilders’ hopes of forming a government were dashed, public sector borrowers are flocking back to capital markets.

Municipality Finance this week enjoyed a boost to its plans to term out its funding, as an investor placed a reverse enquiry order for a record breaking long dated euro note.

DG Hyp enjoyed solid demand for a long nine year Pfandbrief deal this week as, despite the measly new issue concession, it offered an unusually high pick-up against Bunds.

As the first non-German bank in the eurozone to price a €1bn covered bond in over a month, OP Mortgage Bank was perhaps overly careful with its initial approach to pricing. But the plan paid off.

After a month of much slower supply, increasingly desperate covered bond investors clamoured to buy a long nine year Hypothekenpfandbrief issued on Wednesday by DG Hyp. Though the bonds offered little new issue concession, interest was also boosted by the deal’s hefty spread over Bunds.

Covered bond supply is likely to recover over the next week or two, particularly in core Europe where spreads to Bunds have become more attractive, which bodes well for DH Hyp’s forthcoming Pfandbrief. But for non-eurozone issuers, senior funding is likely to prove more attractive.