Interview by Alice Gledhill – Bloomberg

  • Spanish lender has the most significant exposure of EU banks –

  • Credit investors shouldn’t be worried: Atlanticomnium analyst –

Spanish lender Banco Bilbao Vizcaya Argentaria SA’s shares and bonds were under pressure on Monday as a currency crisis gripped Turkey, a country that accounts for 16% of the bank’s annual income.

Contingent convertible bonds issued by BBVA, the most exposed of any European bank to Turkey, fell as much as 0.5 cents on the euro — the most in almost a month, according to data compiled by Bloomberg. CoCos, orAdditional Tier 1s, take losses before other types of debt when the issuing bank runs into trouble.

BBVA’s shares were also trading more than 6% lower by 10:35 a.m. in London, their hardest fall since November.

Financial-market pressure on the bank comes after the Turkish lira plunged as much as 15% against the dollar following President Recep Tayyip Erdogan’s decision to oust the country’s central bank chief. Turkish dollar-denominated government bonds maturing in 2026 fell the most since issue in January.

A spokesman for BBVA said the bank’s commitment to Turkey is unchanged. Around 60% of 2021 earnings from the country are already hedged and a 10% decline of the lira versus the euro would have an impact on the bank’s capital of just -2 basis points, the spokesperson said.

BBVA has almost 8% of its assets invested in Turkey, according to Bloomberg Intelligence analyst Tomasz Noetzel.

Credit investors “shouldn’t be worried,” about BBVA’s exposure to the country, according to Romain Miginiac, head of research at Atlanticomnium SA. Even after slipping on Monday, BBVA’s AT1s remain close to their highest prices in a year.

The bank’s Turkish operations “have remained profitable despite the turmoil in previous years,” he said.

BNP Paribas’ 9 billion euros and ING’s 8.6 billion euros of Turkish loans make up well below 2% of their total loan books and seem to be more manageable risks, Noetzel said.

READ MORE: Lira Sinks as Much as 15% After Erdogan Fires Central Banker (1)

Dollar bonds issued by Turkish corporates including household appliances maker Arcelik AS and foods company Ulker Biskuvi Sanayi AS, also fell on Monday.

Europe

Primary market participants are expecting another busy week across all sectors, according to a Bloomberg News survey conducted on March 19. Year-to-date sales are set to reach 500 billion euros ($595 billion) in record time and a new first-quarter issuance record could also be set.

  • “Increased supply here in Europe has already shown that issuers are more minded to reconsider their options in light of a more volatile and widening market,” Armin Peter, UBS Group AG’s global head of the debt capital markets syndicate, wrote in a note
    • A Bloomberg Barclays index tracking high-grade euro company bonds has edged 3bps wider since the start of March
  • A bond sponsored by the Danish Red Cross is the first to offer dedicated insurance against volcanic eruptions
  • Virtue in corporate environmental, social and governance debt is becoming lucrative for investors and companies alike, but vice still has its rewards in the hunt for yield
  • Trading begins today for Series 35 of CDS gauges (see story)

Asia

An Indian company is returning to the bond market after two failed attempts earlier in the month as borrowing costs fall from recent peaks.

  • Indian Railway Finance Corp., one of the nation’s top offshore debt issuers last year, mandated banks to hold investor calls globally from Monday for a five-year dollar-denominated note
  • Public finances will only cover a “fraction” of the green financing investment needed for China to achieve its climate-change goals so the market will be encouraged to make up the difference, according to People’s Bank of China Governor Yi Gang

U.S.

U.S. companies including hotel chain Hilton Worldwide Holdings Inc. are so anxious to lock in low borrowing costs now, before inflation fears push yields even higher or close the market altogether, that they’re paying millions of dollars in penalties to refinance debt early.

  • The corporations, which also include car renter Avis Budget Group Inc. and financial index company MSCI Inc., are selling new bonds and using the money they raise to buy back existing notes

–With assistance from Macarena Munoz and Paul Cohen.

To contact the reporter on this story: Alice Gledhill in London at agledhill@bloomberg.net

To contact the editors responsible for this story: Hannah Benjamin at hbenjamin1@bloomberg.net ,Chris Vellacott, Charles Penty

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