Permanent TSB shrugs off market nervousness to sell €500m of bonds

Permanent TSB is understood to have sold about €500 million of bonds this week, shaking off nervousness in the European bond markets as investors fret about the finances of Deutsche Bank.

Sources said that the Permanent TSB’s sale of residential mortgage-backed securities (RMBS) through a vehicle known as Fastnet Securities 12 has been priced in recent days to carry an effective interest rate of 0.4 per cent. The bonds are due to mature in five years, they said.

It was the bank’s first public RMBS sale since November 2013. Canadian debt ratings agency DBRS had said in a note two weeks ago that 92.7 per cent of the €691 million of mortgages in Fastnet Securities 12 had not been in arrears in the past five years, while a further 5.4 per cent that had been at least three months behind in repayments at one stage were currently meeting their loan terms.

The news comes as the broader market has been rattled by mounting speculation in recent days that Deutsche Bank, Europe’s largest investment bank, may need to raise capital as it faces a potential $14 billion (€12.5 billion) fine to settle a US probe into allegations that it misled mortgage bond investors during the financial crisis.

Abandon plans

The past two days has seen fellow German lender Norddeutsche Landesbank abandon plans to sell bonds that mature in seven years in a volatile market. Germany's flagship airline Lufthansa also pulled a euro-bond deal on Monday after failing to get the desired price.

The Permanent TSB bonds differ, however, in that they are securitised against a set of assets.

"Deutsche Bank's problems have increased market risk aversion," Chris Telfer, a money manager at ECM Asset Management in London, told Bloomberg News. "Investors are being pickier right now and there are far better banks to get involved in" than NordLB.

Before the Deutsche Bank sell-off, bond issuance in the euro area was enjoying a recovery from a sluggish start to the year. A surge since the summer trading break sent 2016 sales above €250 billion, almost matching the year-earlier tally and about €7 billion off the record set in 2009.