In spite of the heavy deal flow, virtually every issue was oversubscribed and traded well in the secondary market, reflecting the huge levels of cash investors are keen to put to work before the summer's quietest month and after several weeks of low issuance.
"You have this week and next week and then you will start to lose the audience overseas in London and Europe as they go on vacation," said one banker.
"The resilience global markets showed against last week's terrorist attacks has also given strength," added a senior syndicate manager at a Wall Street firm.
A sell-off in Treasuries this week, with the 10 year yield now around 4.18% again from recent levels of around 3.9%, also prompted issuers to come to market now, while global investors are still focused more on work than play.
Amid a plethora of transactions of every kind, including remarkable clutches of deals from Latin American and Asian issuers and two standout US corporate bonds from Wrigley and Genentech, the global dollar market also came back to life.
The sector has been through a drought for weeks, caused by falling Treasury yields and the underperformance of the $5bn Federal Republic of Germany bond, issued in late May.
This week, four top quality issuers brought dollar globals — L-Bank, the Kingdom of Spain, Swedish Export Credit and KfW.
The trigger was 10 year Treasuries hitting the 4.1% mark — a signal for Asian investors to commit to the dollar market once more.
The $1.5bn five year bond from L-Bank (Landeskreditbank Baden-Württemberg) was the clear favourite of the week for international dollar investors.
Led by Citigroup, Dresdner Kleinwort Wasserstein and HSBC, it was the issuer's first global and was initially marketed as a $1bn issue, to be priced in the mid- to high 30bps over the five year Treasury.
A high quality book of $1.7bn allowed it to be increased to $1.25bn and then $1.5bn, and pricing was fixed at 37bp over.
Key to the deal's success was L-Bank's classification as a sovereign borrower by the Securities and Exchange Commission.
"We are pleased to have issued our inaugural dollar bond as a Schedule B Filer," said Sven Lautenschlager, head of international funding at L-Bank in Karlsruhe. "It confirms to the market L-Bank's status as a quasi-sovereign/agency issuer, because only issuers in this category can file under Schedule B. By obtaining this exemption, even though we carry the guarantee of the Federal State of Baden-Württemberg and not the guarantee of the Bund, we have the same classification as KfW in the SEC's SIC scheme, and are recognized as having the same legal background."
PJ Bye, director of public debt syndicate at HSBC in London, said L-Bank's marketing efforts in the US had paid off handsomely. "The name was not particularly well known in the US as it had not issued in global format before, and to have sold 41% of a $1.5bn issue into that region is an impressive result," Bye said. "I have to say the borrower has done a fantastic job on the road."
Fifty accounts participated in the issue, including fund managers, central banks, banks, pension funds, insurance companies, hedge funds and corporate investors.
Asia and Europe, where L-Bank has a long-established franchise through a series of strategic Eurodollar benchmarks, took 46% and 13% of the issue respectively.
"L-Bank has consolidated its investor base in Eurodollars, which was essentially the central banks, Asian accounts and European retail, and it has added a new dimension with the US accounts," Bye said. "L-Bank was also able to improve on its previous dollar funding level. Its last transaction was priced at Libor less 2bp whereas the new deal came at less 7bp."
Spain misfires with too-tight pricing
While L-Bank enjoyed accolades from market participants, the Kingdom of Spain was criticised for being too aggressive with its $1bn five year bond at the equivalent of Libor less 27bp, and for not timing its deal particularly well.
"Investors are just not buying the expensive sovereign issues at the moment," commented one banker involved in the transaction. "After the German issue, which has underperformed and now trades at less 26bp, having printed at less 32bp, the whole market traded off, as yields dropped to levels where Asian accounts weren't willing to buy anything. Now that yields are back above 4% in 10 years, liquidity is being put to work again, but investors are still not buying the top tier names."
Barclays Capital, Citigroup and Dresdner Kleinwort Benson won the issue in a competitive bidding process.
Sean Taor, head of frequent borrower syndicate at Barclays in London, defended the pricing by citing the trading levels of other triple-A European sovereigns.
"To put Spain's pricing in context, Germany came at Libor less 32bp/33bp and Ireland at less 30bp/31bp," he said. "Spain itself came last year in the mid-20bps through and has traded as tight as 30bp through."
This transaction is Spain's first dollar bond since it was upgraded to full triple-A status in December and it will be the kingdom's only international currency deal this year.
Taor said the deal was not fully subscribed, but that the leads intended to support the price at re-offer. "We are supporting the bond in the brokers at Treasuries plus 17bp," he said. "We have bought paper back but we will maintain the re-offer spread, which will be important for the ongoing strength of the transaction in the coming months."
SEK pleases at spread over agencies
The $1bn three year bond from Swedish Export Credit Corp (SEK) was judged a fair success by the market.
It was the borrower's second dollar global of 2005, after a five year issued in January.
Maturing in October 2008, the deal was priced by Barclays, Morgan Stanley and Nomura at 27bp over Treasuries, the tight end of the 27bp-28bp price guidance.
Richard Anund, SEK's head of funding, said he was pleased with the breadth and diversity of the order book, with 40% of the bonds going to Asia, 30% to the US and 26% to Europe and the UK.
"Central banks and official institutions were the most important investor base, taking 45% of the issue," said Anund, "but Swiss retail were also involved, as were pension funds, insurance companies and asset managers. In fact there was a little bit of everything in the book."
SEK has a following with investors in all three time zones, and the fact that it typically pays a small premium over US agencies ensures a favourable reception. At the time of pricing, at around Libor less 13.5bp, US agencies were trading at less 16bp/17bp.
A $1bn 10 year transaction for KfW completed the quartet. Citigroup and Nomura led the issue with no further syndicate, and it was not issued under the borrower's benchmark programme.
"The deal was structured around specific demand identified by the two lead managers," said Frank Czichowski, KfW's treasurer in Frankfurt. "This explains the relatively quick execution and absence of a syndicate. Priced at the equivalent of Libor less 16bp, the deal was in line with KfW's outstanding 2014 transaction trading at less 16.4bp."
With 10 year Treasury yields reaching over 4.15% on Thursday, bankers are predicting further issuance next week, as borrowers take advantage of what might be the last window before the summer slow-down. The European Investment Bank, for example, was heavily rumoured to be a candidate for a seven year dollar bond.
