Major bond markets reached a tipping point last week with three new issues pulled from London syndicate offices due to a lack of demand.
The list of victims could have been even longer, as a few more deals have only just crossed the line as bankers struggle to devise appropriate pricing strategies in a highly volatile environment. “It’s a tough market,” said one banker.
The premium for smart execution also rose after the ECB ended its net asset purchases last week. Although the central bank will remain a player in both the primary and secondary markets as it reinvests proceeds from maturing bonds, its presence will be on a smaller scale and less predictable.
The primary market had looked shaky the previous week, with several covered and public sector bond deals set to close even with big concessions on offer. On Monday, the market finally broke free as two deals were withdrawn due to weak demand – one from the French oil reserves manager sages in euros, the other from a British investment bank close brothers in sterling.
Another agreement was also postponed on the same day, because the Czech public railway company Ceske Drahy halted its first green bond halfway through following a train crash in the country, adding to a sense of foreboding.
Then Tuesday, CDP Financialwhich is guaranteed by the Caisse de depot et placement du Quebec, canceled its three-year long benchmark in US dollars after being unable to build a sufficiently strong portfolio.
There have also been cancellations of liability management exercises, including one by a French video game company Ubisoft Entertainment and another from the UK AAwhich is best known for its roadside assistance service.
stuck in the middle
Each new issue had its own failure reason. Sagess, for example, fell between two stools, being neither a pure agency nor a pure company. The prospects were unable to move prices from the initial zone 45 basis points above the OAT level for the June 2029 €500m note and ultimately had to cancel the deal.
“In this market, you want to engage with as broad an investor base as possible,” said a banker familiar with the deal. “For that, you’re excluding some investors with the spread, because for those who see it as a business, it’s off the market in terms of the squeeze. So you’re alienating some of the investor base and the reality is that with the market right now, people prefer liquid and more frequent issuers.”
But even relatively frequent and well-known transmitters are in trouble. African development bank managed to secure a US$1 billion global bond in July 2025 on Tuesday, but the books were only US$900 million (with tracks supposed to make up the shortfall) and prices haven’t budged the starting point of average SOFR swaps plus 25 basis points. In July 2021, when the AfDB last issued in the US dollar market, it had over $4.2 billion in books for a $2.75 billion five-year bond.
Same KfW played it safe, tightening prices by just 1bp on a €4bn November 2029 green bond on Tuesday, even though the pound was €13.6bn. The final mid-swap spread minus 16bp left a concession of around 4bp. “In recent large trades, we were able to tighten the price by 2 basis points or more. But we have to consider that the market is now different, with the end of the net ECB purchase program and increased volatility “Investors want more certainty about the value of their investment. This leads to smaller adjustments during the marketing process and higher new issue concessions,” said Jorg Graupner, vice president of the capital markets department. from KfW, who added that the agency also wanted some flexibility on the size of the deal.
The first banker said that executing trades is incredibly difficult because the rates markets move so much during the day, both up and down, that investors don’t know whether recession, inflation or both should be the biggest concern. “It’s about finding the point that offers relative value. Everyone looks at value from different angles – relative to governments, versus swaps, or absolute returns. When swaps and rates move in different directions , it’s hard to come to a consensus on fair value. It’s only with the benefit of hindsight that you realize something seems too tight.”
This inability to determine fair value was amply illustrated by CDP Financial, which was attempting to re-enter the US dollar market for the first time since January. The September 2025 deal struggled from the start, with the price settling flat against initial average swap prices plus a 42 basis point zone, before it was pulled. Bankers away from the deal estimated the new issue premium to be between 5bp and 11bp
“The problem is that if you’re not a basic or safe name, investors don’t have to buy because those names have widened so much that they can be found at very attractive levels,” one banker said. of the union.
“The key is in the price. It has to be cheap enough. And what was cheap yesterday may not be cheap today.”
(Additional reporting by Luke Acton and Robert Hogg)