UniCredit SpA and Societe Generale SA sold bonds after borrowing costs for financial companies dropped by the most in six months in Europe amid confidence central banks will maintain stimulus measures.
UniCredit Bank Austria AG, a unit of Italy’s biggest bank, marketed 500 million euros ($676 million) of securities due May 2019 while France’s second-largest lender issued 1.5 billion euros of floating-rate notes that mature in May 2015, according data compiled by Bloomberg. The average yield on investment-grade financial bonds fell 23 basis points to 1.54 percent, the lowest since May 31, according to Bloomberg bond index data.
“This is opportunistic issuance towards the end of the year while the environment is accommodative,” said Roger Francis, a credit analyst at Mizuho International Plc in London. “Normally at this time of year one would expect banks to have finished their issuance. The European Central Bank acted faster than the market had anticipated, showing they are acting aggressively to keep rates low.”
The ECB will add another round of loans into the banking system early next year after cutting its benchmark rate to a record 0.25 percent this month, according to economists’ forecasts in a Bloomberg survey. Federal Reserve nominee Janet Yellen said last week she would ensure monetary stimulus continues until the U.S. economy improves.
UniCredit Bank Austria’s securities were priced to yield 135 basis points more than the mid-swap rate while Paris-based Societe Generale’s notes yield 28 basis points more than the three-month euro interbank offered rate.
The “purpose of our bond issue is refinancing,” said Martin Halama, a spokesman for UniCredit Bank Austria in Vienna. “We’re doing this now because the market is favorable and we understand that the investors are still cash-rich. Today’s bond issue is already a pre-funding for 2014.”
The cost of insuring investment-grade financial company debt against losses is approaching the lowest since April 2010, with the Markit iTraxx Senior Financial index falling 3.3 basis points to 104 basis points at 2:38 p.m. in London.
Other banks in the market today include Nordea Bank AB. The Stockholm-based lender sold 1 billion euros of floating-rate notes maturing in three years at a spread of 33 basis points more than three-month Euribor, data compiled by Bloomberg show.
Banco Espirito Santo SA, Portugal’s biggest publicly traded bank by market value, has hired banks to arrange investor meetings starting tomorrow for a sale of subordinated bonds in euros, according to a person familiar with the matter.
In the sterling market, The AA Group Ltd., the roadside recovery and insurance division of Folkestone, England-based Acromas Holdings Ltd., is selling 500 million pounds ($805 million) of notes maturing July 2020 through its AA Bond Co. Ltd. unit, a person with knowledge of the transaction said. The securities will yield 233 basis points more than U.K. government debt.
The Great Rolling Stock Company Plc, a U.K. train leasing company known as Angel Trains, is adding to its 6.5 percent pound notes maturing in April 2031 at a spread of 145 basis points more than gilts.
In the sterling high-yield market, Brakes Group, a food distributor based in Kent, England, is meeting investors until Nov. 20 for a potential sale of 200 million pounds of five-year notes. The securities, to be issued through the company’s Brakes Capital unit, may be rated B3 by Moody’s Investors Service, six levels below investment grade.
Grainger Plc, a Newcastle-based residential landlord, is also holding investor meetings this week to sell 200 million pounds of secured notes to refinance existing debt.
The average yield on junk-rated pound bonds is 6.15 percent, 20 basis points above a record low of 5.95 percent reached on May 9, according to Bank of America Merrill Lynch index data.