The European corporate bond market is expecting more debut issues this week, but strong demand in the primary market has not been followed up in the secondary market, where several deals have met resistance from investors.
The last few weeks have seen a resurgence in activity as low yield spreads have tempted corporate issuers.
Order books have been heavily oversubscribed, leading to tighter yield spreads and cheaper financing.
However, demand has not been the same after the deals have been launched and the credit spread in several deals launched this month now trade wider than where they were launched.
"The pull-back was inevitable given the tremendous and unseasonal tightening we witnessed during the summer," said Suki Mann, credit strategist at SG CIB. "We still expect the market to go tighter into the end of the year."
EWE, the German utility company, on Monday set terms for its inaugural euro bond issue, from which it is expected to raise at least €500m.
The company offered a yield of 40-42 basis points above the mid-swap rate for its 10-year bond and a premium of 55bp for a 15-year deal. Guidance on the 10-year deal was tightened from an initial range of 40-45bp.
Barclays Capital, Dresdner Kleinwort Wasserstein and Goldman Sachs are lead-managing the sale.
The roadshow for the debut issue from Tchibo, the German coffee supplier, ends today and the company is expected to issue a benchmark bond by the end of the week, through ABN Amro, DrKW and JP Morgan.
Metro, the German retailer, will on Tuesday set the terms for its new five-year bond and the buy-back of some of its 2006 notes, which will extend the maturity of its debt redemptions.
The company will issue a minimum of €300m of floating-rate notes to fund the repurchase of between €150m and €400m of the €750m of 2006 notes.
DrKW, HSBC and SG CIB are managing the sale and buy-back.
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