By Serena Ruffoni
The euro area's temporary bailout fund, the European Financial
Stability Facility or EFSF, came to the primary market Tuesday,
announcing the longest-maturing bond of its range--25 years.
Agencies, banks and corporates also issued bonds Tuesday amid a
distinctively gloomy tone, originating from worries over Spain and
Italy's debt sustainability which pervaded the secondary
markets.
The EFSF--designed to provide financial assistance to the
troubled euro-zone countries that requested it, namely Greece,
Ireland and Portugal--announced a minimum 1-billion-euro ($1.26
billion) bond, maturing in 2037. Order books are in excess of EUR1
billion, one of the banks said, and initial price guidance is in
the area of 130 basis points over midswaps, at the wide end of the
initial price expectations of between 125 and 130 basis points over
midswaps.
Deutsche Bank, JPMorgan and BNP Paribas are lead managers on the
deal.
The EFSF is rated Aaa by Moody's Investors Service Inc., AA+ by
Standard & Poor's and AAA by Fitch Ratings.
In France, Caisse d'Amortissement de la Dette Sociale, or CADES,
the country's social security debt management agency, is planning a
benchmark-size tap of its 4-billion-euro ($5.03 billion) 4% bond
maturing in December 2025. Initial price guidance is 17 basis
points over the reference French government bond.
France's Banque Federative du Credit Mutuel, or BFCM, is
planning to issue a senior euro-denominated benchmark bond with
initial pricing in the area of 170 basis points over midswaps.
Citigroup, Credit Suisse and HSBC are lead managers on the deal
which is due to price later today.
BFCM is rated Aa3 by Moody's and A+ by both Standard &
Poor's and Fitch.
Germany's Aareal Bank AG (ARL.XE) and Deutsche Hypothekenbank
will both price a EUR500 million, five-year covered bond.
In corporates, Germany-based K+S AG is planning to issue a
EUR500 million 10-year bond with initial pricing in the 125 basis
points over midswaps area.
The supplier of standard and specialty fertilizers to the
agriculture industry has hired Barclays, HSBC, LBBW and Santander
to lead-manage the deal.
K+S is rated Baa2 by Moody's and BBB+ by Standard &
Poor's.
Meanwhile, the tone in secondary markets was mostly negative
with questions over Spain's debt sustainability, after European
leaders' agreement for an up to EUR100 billion loan to support its
banking sector continued to rattle markets. Italy was also caught
up in the turmoil, its government bond prices fell in tandem with
the Spanish ones.
At around 1220 GMT, the iTraxx Europe index, which comprises 125
high-grade borrowers, 25 of which are banks and insurers, was at
183/184 basis points, six basis points wider from Monday's close,
according to Markit.
Credit default swaps are derivatives that function like an
insurance contract for debt. If a borrower defaults, sellers
compensate buyers.
The Crossover index of 40 mostly sub-investment-grade European
corporate borrowers was 23 basis points wider at 714/717 basis
points.
(Carol Dean, Ben Edwards and Sarka Halas contributed to this
article)
Write to Serena Ruffoni at serena.ruffoni@dowjones.com