Bloomberg News

Commerzbank, HSBC Sell Debt as Euro Debt Crisis Jitters Return

October 17, 2011

Oct. 17 (Bloomberg) -- Commerzbank AG and HSBC Holdings Plc raised a total 2.1 billion euros ($2.8 billion) by selling bonds just as a German government spokesman cooled initial optimism for a quick fix to the region’s debt crisis.

Commerzbank, Germany’s second-largest lender, priced 800 million euros of two-year senior, unsecured floating-rate notes in its first benchmark deal in euros since March, according to data compiled by Bloomberg. London-based HSBC, Europe’s biggest bank, raised 1.25 billion euros from 3.875 percent senior bonds due 2018.

The banks tapped bond markets as relative yields on financial firms’ debt fell to the lowest since Sept. 21 on signs a strategy to avert a Greek default, bolster lenders and stem contagion would be drafted by Oct. 23. The cost to insure bank debt jumped after Germany said European leaders won’t provide the complete fix that global policy makers are pushing for.

“Commerzbank and HSBC took advantage of a new window of opportunity on the back of rising expectations for a solution of the European crisis,” said Andreas Fischer, a Zurich-based fund manager at Clariden Leu AG. “The still-fragile market sentiment means companies are taking every opportunity to place new issues.”

The extra yield investors demand to buy bank bonds instead of government debt shrank to 377 basis points as of Oct. 14, down from a 28-month high of 411 on Oct. 4, Bank of America Merrill Lynch’s Euro Corporates Banking index shows.

Bond Risk

The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 banks and insurers rose 3 basis points to 245, reversing a decline, according to JPMorgan Chase & Co. An increase signals deteriorating perceptions of credit quality.

Commerzbank priced its bonds at 158 basis points more than the euro interbank offered rate, according to data compiled by Bloomberg. The Frankfurt-based lender’s last euro benchmark offering was a 1.25 billion-euro issue of subordinated bonds due 2019 that is sold in March.

London-based HSBC priced its seven-year bonds to yield 160 basis points more than the benchmark swap rate, Bloomberg data show. The sale is HSBC’s first benchmark deal in euros since May when its French unit sold 1 billion euros of floating rate notes due December 2012.

Commerzbank stock fell 6.8 percent to 1.58 euros as of 4:32 p.m. in Frankfurt trading. HSBC fell 0.5 percent to 522.2 pence in London.

--Editors: Andrew Reierson, Paul Armstrong

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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