Sept. 22 (Bloomberg) -- It's been 2 1/2 months since a bank managed to sell a conventional bond in Europe's public markets, the longest period without a deal ever and another example of the sovereign crisis choking off funding.
UniCredit SpA was the last non state-owned bank to issue senior, unsecured benchmark notes in Europe with a 1 billion- euro ($1.4 billion) sale on July 13, according to data compiled by Bloomberg. That compares with deals worth 41.9 billion euros in the third quarter of last year.
Banks are the biggest buyers of other lenders' bonds as well as debt sold by euro-region nations, and are being hurt by Greece's flirtation with default and proposed laws that would force their creditors to take losses before taxpayers. That's pushed the cost of selling bonds to within five basis points of the record reached in the aftermath of Lehman Brothers Holdings Inc.'s failure three years ago.
Unnerved by counterparties' potential losses on sovereign bonds, banks prefer to deposit their cash at central banks than lend it on. Banks parked an average 135 billion euros with the ECB over the past 10 days, close to the highest amount since July 2010, according to data released daily by the Frankfurt- based lender.
"The old adage in finance is that, if you're going to panic, you should panic first, and that's what's happening," said David Watts, a strategist at research firm CreditSights Inc. in London. "People just don't know the extent to which banks may face losses on the sovereign bonds that were previously risk-free assets."
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