LONDON – Peripheral banks, used to paying generous new issue spreads compared to banks from the eurozone core, have become victims of their own success, and overwhelming demand for their bonds has withered in recent weeks as spreads have tightened.
Until very recently investors could not get enough of peripheral debt, but they have now started to pull back, worried by the limited upside.
“The market is taking a bit of a pause for breath and as liquidity gets withdrawn by the US central bank, people tend to be a bit more wary and things are not quite as frenzied,” said Robert Montague, a senior investment analyst at ECM Asset Management.
He said the performance of the recent deal for National Bank of Greece had been a bit of a reality check for the market.
The 750-million-euro issue was only three-times subscribed, a far cry from the six times covered book for Piraeus’s 500-million-euro three-year deal that priced in the middle of March.
Furthermore, NBG is still trading below reoffer at a yield of around 4.69 percent, according to Tradeweb, having priced at 4.5 percent. [IFR]