Europe

After weeks of volatility following President Emmanuel Macron’s decision to call snap parliamentary elections in France, markets were breathing a sigh of cautious relief on Monday after the far-right Rassemblement National (RN) underperformed the polls.

The global financial crisis was a seismic shock to banking systems globally, and triggered a regulatory marathon with banks having to adapt to a far stricter set of rules (known as Basel III) set out by the Basel Committee on Banking Supervision (BCBS).

For the fixed income fanatics amongst us, June was always going to be one for the books with all three of the major central banks meeting, elections, and continued data.

Phoenix Group (Phoenix), a UK-based insurer mostly in the savings and pensions business, announced a tender offer at par for up to $500m of its $750m 5.625% RT1 callable in January 2025, and $350m Tier 2 callable in June 2026.

When market participants were asked at the end of last year to enumerate the main risks investors would face in 2024, the vast majority of those surveyed counted politics and elections amongst the top factors to consider for the unrewarding task of forecasting total returns for major asset classes over the following twelve months.

The European asset-backed securities (ABS) market saw a record issuance last week with €5bn of primary issuance.

The European Central Bank (ECB) will almost certainly start their rates cutting cycle next month. Supportive inflation data and clear guidance from the governing council has driven market implied probabilities of a June cut to almost 100%, with little in the way to derail that.

The first four months of this year have seen €11.6bn in gross Additional Tier 1 (AT1) issuance from European banks, across euros, dollars and sterling markets.

Recently, BBVA announced that it had approached the management of Banco Sabadell, to explore a possible merger between both entities, with BBVA also appointing advisers for this purpose.

Following yesterday’s release of Italian energy company Enel's 2023 annual sustainability report, it was confirmed that they had failed to meet the emissions reduction key performance indicator (KPI) linked to a number of their sustainability linked bonds (SLBs).

The Additional Tier 1's product was first launched in early 2013, so the asset class has mostly seen the period of negative interest rates and challenging operating environment post the Euro zone crisis.

We have had a busy week on the central bank front with the Federal Reserve chair Jerome Powell’s semi-annual testimony to congress on Wednesday before Christine Lagarde took centre stage at the European Central Bank press conference yesterday.