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January 15, 2013 5:22 pm
Banks in Italy, Spain and Portugal have raised more than $13bn in capital markets since the start of January, versus nothing in the same period last year, as they take advantage of better market conditions to issue debt.
Yields on government bonds in the periphery are continuing to benefit from the European Central Bank’s commitment to backstop the euro. At the same time, the cost of funding in public debt markets for many peripheral banks has also reached more reasonable levels, though it is still well above the amount being paid by northern European lenders.
In recent months, banks in the periphery – including in Ireland – have been eager to show that they are no longer dependent on the cheap loans offered by the ECB under its three-year longer-term refinancing operations programme. And in a low yield environment, investors have been keen to snap up higher yielding peripheral bank debt.
Despite the apparent rush, overall issuance by banks across Europe is down on previous years. According to Dealogic, year to date the amount of senior unsecured debt issued by European banks is at its lowest level since 2008. Covered bond issuance is the slowest since 2009.
“It looks big but there’s been only half the amount for FIG [financial institutions] compared to last year,” said Armin Peter, head of covered bonds at UBS.
“It’s a very strong market for peripherals. But it’s a continuation of the general theme with bank deleveraging and having less funding requirements in 2013,” he said. “So there’s still an imbalance between demand and supply.”
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