The big bond squeeze
Any new debt issue offering a scrap of yield has met huge demand from investors in recent months. As money floods into fixed-income funds, asset managers cannot put it to work in illiquid secondary markets, leaving the primary market as their only liquidity window. Small investors complain of being unfairly squeezed out from new-issue allocations. Large investors grumble that all other buyers are inflating their orders. And the elephant in the room? Nervous banks sense that regulators are preparing to pounce on traditional allocation practices in debt capital markets.
It was an unremarkable deal, from a well-known issuer in a busy period in the debt capital markets that didn’t even need an investor call to sell it, never mind a roadshow.
The €500 million 12-year, non-call seven, tier 2 deal from Danske Bank, the largest bank in Denmark, rated BBB by Standard & Poor’s and A- by Fitch, offered a coupon of just 2.75% and priced at a slight discount to yield 2.767%.