While the stress tests have given investors greater clarity about European bank balance sheets, enabling them to tick that very important solvency box, the desire of Europe’s banks to come to the market with large benchmark debt issues still remains somewhat circumspect.
There’s a pure and simple reason for that. Funding costs in the bond markets remain high, relative to where they were in the first quarter, when a typical AA-rated bank could issue a benchmark five-year deal at 80 basis points over Libor. The sovereign crisis prompted that yield premium to almost double in some cases, and as a result many issuers have continued to...
