Ireland, Slovenia and Portugal opened euro zone government bond deals for 2020 on Tuesday, with analysts expecting heightened geopolitical risk to mean new supply should be easily absorbed by investors keen to hold fixed income.
January is usually a busy period for government bond sales, both at auctions and via bank syndication, with Tuesday’s flurry of syndicated bond deal announcements expected to boost issuance volumes for the month.
Slovenia launched a 10-year bond deal, while Ireland is looking to raise around 3 billion euros from a 15-year bond, a market source told Reuters. Portugal, meanwhile, has mandated banks to manage the sale of a new 10-year government bond, maturing in October 2030, soon, sources said.
“This is the first real day of broad-based new issue activity in the new year, and we are seeing lots of activity in the primary market, which is encouraging,” said Povl Bak-Jensen, head of syndicate at Nordea.
“We are entering 2020 on the back of a strong close to 2019, we’ve had some geopolitical turmoil, but hopefully this will not spread.”
Gross eurozone government bond issuance via auctions is likely to come in around 65 billion euros ($72.55 billion) this month, but this number could top 100 billion euros given syndication, ING bank said in a note.
Dublin, which has begun its funding drive with a syndicated sale every year since 2013, had mandated banks for the sale of the new bond soon, a lead manager said.
“We were expecting a 10-year issue at around 4 billion euros, looking at past examples,” Richard McGuire, head of rates strategy at Rabobank in London, said.
“The fact that it is a 15-year issue was a bit of a surprise, but Ireland is performing well on the back of the announcement,” he said of the Irish secondary bond market.
The closely watched gap between Irish and German 10-year bond yields was tighter at 29 basis points, versus 34 bps in late Monday trade.
Slovenia opened its sale of a new 10-year bond, which it hoped would raise 1.5 billion euros. Lead managers reported strong demand strong with orders in excess of 11.75 billion euros.
ING said it anticipated Belgium, Austria, Spain and Greece to all come to the market with deals in the coming weeks. (Reuters)
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