Issuance by international SSA names in Swiss francs this year has been limited to CAF’s original deal, which was priced in February, and last week’s Sfr125m 10 year from North American Development Bank.
A banker on the CAF transaction, which was priced on Wednesday, said this shortage of supply, combined with a strong rally in Swiss rates, created good conditions for the reopening.
“Wednesday was the eighth consecutive day on which interest rates dropped and the 10 year swap rate was approaching zero,” he said. “This gave us the conviction that we would be able to do a tap through fair value.”
The original bond was quoted with a bid/offer spread of 39bp/36bp over mid-swaps pre-announcement. Guidance on the new issue was set at 32bp over with a minimum size of Sfr100m.
“Despite the fact that this was 4bp through the offer side, we saw solid demand early on from the insurance and management community as it still offered yield pick up over the dauntingly low swap curve levels,” the banker added.
The strength of demand allowed CAF to upsize the deal to Sfr150m and price in the middle of the guidance range at 32bp over mid-swaps.
The original bond repriced in line with the tap and subsequently tightened still further. By the end of Wednesday it was quoted at 32bp/30.5bp over mid-swaps.
Insurers took 40% of allocations, with a further 34% going to asset managers, 16% to treasury accounts and 6% to pension funds. UBS acted as bookrunner.
Bankers said issuance from international SSA names in Swiss francs was likely to remain extremely muted for at least the next few months.
“The CAF deal clearly shows the appetite from investors is there,” said one. “However, the bulk of SSA issuance comes from core European countries and at the moment those names would be more expensive in Swiss francs than domestic govvies so I don’t believe it would be feasible.”
