BBVA $Benchmark PerpNC7 AT1: IPT 7.50% vs FV ~7.15% — 35bp Concession on the Table

30 Apr

New BBVA USD AT1 launching today at 7.50% IPT, PerpNC7 structure, expected $1.0–1.5bn benchmark size based on the issuer's typical USD AT1 sizing. Triangulating against BBVA's own USD AT1 curve, the EUR PerpNC2032 cross-check, and Santander/UBS PerpNC10 peers, fair value sits around 7.15%. That implies ~35bp of concession at IPT, with realistic landing in the 7.15–7.25% area.

Curve Inputs

Reference Level 5Y UST 4.06% 7Y UST 4.24% Implied reset margin at IPT ~344bp

BBVA Own-Curve Anchor

Bond Years to Call YTC Z to Call 6.125% PerpNC2027 (USD) ~1.5 7.86% 229bp 9.375% PerpNC2029 (USD) ~3.0 8.40% 174bp 7.75% PerpNC2032 (USD) ~6.0 7.05% 278bp 5.625% PerpNC2032 (EUR) ~6.5 6.11% 306bp

The 7.75% PerpNC2032 is the cleanest reference: same issuer, currency, format, one year shorter call.

Peer Curve Cross-Check

Issuer Coupon Call YTC Santander 9.625% PerpNC10 9.625 ~Nov-33 7.98% UBS 9.25% PerpNC10 9.25 ~Nov-33 7.70% BBVA 7.75% PerpNC2032 7.75 May-32 7.05%

Santander/UBS PerpNC10 curve steepness vs their PerpNC5 lines implies ~12bp per year of call extension in current market.

Fair Value Build

Step bp / Level BBVA 7.75% PerpNC2032 YTC 7.05% + 1y call extension premium +10–15bp Fair value YTC ~7.15–7.20% Fair value Z to call ~290bp IPT YTC 7.50% NIC at IPT ~30–35bp

Landing Zone

Scenario Print Tightening from IPT Strong demand 7.10% -40bp Central case 7.15–7.25% -25 to -35bp Soft outcome 7.30%+ -20bp or less

BBVA's recent USD and EUR AT1 deals tightened ~50bp from IPT on >5x cover. A similar outcome here points to the lower end of central case. Expected size $1.0–1.5bn.

Observations

IPT-to-fair gap is meaningful but not exceptional for AT1
New issue prices through Santander on YTC reflects the BBVA-specific spread compression evident on the 7.75s
EUR PerpNC2032 at 6.11% YTC implies post-XCcy basis the USD fair value sits ~7.10–7.15%, consistent with the own-curve build
Trigger 5.125% CET1, standard structural features

This post represents independent observations on publicly available primary market activity and is not investment advice or a recommendation to buy or sell any security. All yield, spread, and fair value estimates are indicative and based on the author's own analytical framework. Readers should conduct their own due diligence and consult appropriate advisors before making investment decisions.

Chief Geek

Dr. Z-Spread — aka Chief Geek. Two decades on tier-one syndicate desks pricing senior, sub, hybrid and AT1 paper. Has seen every NIC trick in the book and still gets excited by a juicy concession.