EUROBONDS: Banks Dominate Primary Market, Indexes Unchanged

By Sarka Halas 

LONDON (Dow Jones)–Financial institutions dominated the European primary bond market Thursday as the costs of insuring European corporate and sovereign debt were mostly unchanged.

Back in the primary after postponing its bond last year, VEB Finance PLC, issuing on behalf of Russia’s Vnesheconombank, has set an initial price guidance of mid-5% on its benchmark-size, dollar-denominated five-year bond.

VEB is the second Russian issuer this year. On Tuesday, Russia’s largest private bank launched a two-part bond offering.

Also in the market was German mortgage bank Bayerische Landesbodenkreditanstalt, or BayernLabo. It priced its EUR500 million, 10-year, senior unsecured bond at 29 basis points over midswaps

Another financial issuer was Erste Abwicklungsanstalt, the bad bank for WestLB AG. EAA has set pricing on its minimum EUR500 million, 4.5-year, senior unsecured floating rate note in the area of 35 basis points over the three-month Euribor.

Nederlandse Waterschapsbank NV, or NWB Bank, has set pricing on its dollar-denominated, benchmark-size, bond at 115 basis points to 120 basis points.

In the corporate space, the primary saw an issuer from the European periphery. Italian toll-road operator Atlantia set final terms on its EUR1 billion, seven-year bond.

Final price guidance is 275 basis points over midswaps, in line with initial price guidance of 270 to 280 basis points over midswaps and well below the initial price thoughts, which were in the area if 290 basis points.

Orders on the issue were north of EUR6 billion as books closed.

Sweden’s SBAB Bank is not yet in the market, but has mandated Citigroup and UBS to organize a series of meetings across Europe. A capital markets transaction may follow.

The meetings start in London Friday and move to France, the Netherlands, Germany, Switzerland and Scandinavia next week.

Elsewhere, European debt insurance costs were largely unchanged from Wednesday’s close, as ongoing Greek debt talks offered no sign of resolution or direction to the market.

Around 1240 GMT, the SovX Western Europe index which investors can use to buy or sell credit default swaps on a basket of 15 sovereign borrower, was unchanged at 325/330 basis points, according to data-provider Markit.

Credit default swaps are derivatives that function like a default insurance contract for debt. If a borrower defaults, sellers compensate buyers.

The iTraxx Europe index which comprises 125 high-grade borrowers, 25 of which are banks and insurers, was unchanged at 138/139 basis points, while the Crossover index of 40 mostly sub-investment-grade European corporate borrowers, was also unchanged at 588/591 basis points.

-By Sarka Halas, Dow Jones Newswires; +44 (0) 207 842 9236;

(Serena Ruffoni and Ben Edwards in London contributed to this report)



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