Sovereigns, supranationals and agencies deals of the year
As a turbulent year for public sector borrower markets drew to a close, the GlobalCapital editorial team picked the standout trades from 12 months that will live long in the memory — from the introduction of eurozone quantitative easing, to Greece’s nail-biting bail-out negotiations and the rare sight of negative swap spreads in dollars. We strived to pick those trades that really made an impact — whether it was re-opening the euro market after secondary distortion from QE made benchmarks a difficult business, or achieving size amid fevered speculation around when the US Federal Reserve would raise rates. The winners are presented here. We hope they are an apt reward for the issuers and banks involved — but also that they spark debate over whether they were truly the worthiest recipients.
Sovereign Euro Deal of the Year
€4bn 1.9% June 2038
HSBC, Morgan Stanley, Royal Bank of Scotland, Société Générale
After several months of difficult conditions as investors adjusted to the distorting effects of eurozone quantitative easing on secondary bond prices, Belgium came on September 9 with a €4bn 23 year bond that not only showed what kind of new issue premium SSAs would have to offer in euros but also proved that demand still existed at the very long end. A €7.5bn book was testament to that.
Sovereign Dollar Deal of the Year
Republic of Finland
$1.5bn 1% May 2018
Bank of America Merrill Lynch, Citi, Goldman Sachs, HSBC
Finland used its rarity status to bring a $1.5bn three year bond on May 13 that was very much focussed on price rather than size. Bankers away from the deal praised the issuer’s choice of tenor, timing and pricing — and the deal drew a very strong showing from Asian investors at 46% of the book. Demand reached more than $2.4bn, enabling Finland to price the deal in line with its curve and make some strong savings compared with its euro funding.
Supranational and Agency Euro Deal of the Year
€5bn 0.125% June 2020
Deutsche Bank, Goldman Sachs, JP Morgan
What more can be said about a deal that came after an extremely difficult period for euro issuance — thanks to secondary distortion from European Central Bank quantitative easing — but attracted a €6.4bn book? KfW’s €5bn five year on August 27 showed the euro market was back in action after months of deals that had failed to impress in size. It proved issuers were comfortable with the new concession landscape — but was still priced at 20bp through mid-swaps.
Supranational and Agency Dollar Deal of the Year
European Investment Bank
$4bn 1.625% December 2020
Bank of America Merrill Lynch, Citi, Goldman Sachs
The post-summer period was a difficult time to consider bringing a dollar benchmark, with all eyes on a US Federal Reserve meeting in September that many in the market thought would bring a rate rise. Volatile swap spreads were making it difficult for issuers to pick a moment to print a deal. After the Federal Reserve held rates fast in September, the European Investment Bank came on October 6 and took the braver option of going down the curve for a five year rather than taking the easier route of a three year deal. It brought in more than $5bn of orders and printed $4bn — an impressive amount for a five year trade in those conditions — and a strong secondary market performance only added to the deal’s lustre.
Sub-Sovereign Deal of the Year
Province of Manitoba
$1bn 2.05% November 2020
CIBC, National Bank of Canada, RBC Capital Markets, Scotiabank
Manitoba had to bring its first dollar issue for over a year at a time when dollar swap spreads were negative in much of the curve and extremely volatile. But opting on November 20 to go to the international market instead of relying on domestic investors paid off, as the Canadian province saved roughly 1bp on what it could achieve at home. That investors had become more wary about Canadian credit because of falling commodity prices only underlined Manitoba’s guts in bringing the deal.
Socially Responsible Investment Bond of the Year
£500m 1.625% June 2020 green bond
Joint books: Barclays, HSBC, Royal Bank of Scotland
Already a seasoned green bond issuer in its core currencies, KfW brought some much needed green supply to the sterling market — and the decision paid off, as it printed £200m more than its minimum target. A £500m size for any SSA other than the UK Debt Management Office in sterling would be notable enough — but with the deal on July 23 achieving a roughly 50/50 split between green and non-green investors, it was another milestone in the burgeoning SRI bond market.
SSA Sterling Deal of the Year
£4.75bn 2.5% July 2065
Bank of America Merrill Lynch, JP Morgan, Royal Bank of Scotland, Santander
The UK Debt Management Office is no stranger to issuing blow-out deals, but this trade went beyond all it had done before. “Arguably the best the DMO has ever done” is how one head of SSA debt capital markets away from the deal described it — and it wasn’t even the record book of £22bn that really turned heads. Although the £4.75bn 50 year issue on October 20 had the longest duration of any UK bond so far, secondary levels were extremely calm leading into pricing — the sign of an exceptionally well executed deal.
Niche Currency Deal of the Year
European Investment Bank
C$1.4bn 1.125% February 2020
BMO Capital Markets, TD Securities
The European Investment Bank smashed the previous C$1bn record for the biggest Canadian dollar bond by a non-Canadian SSA in the currency. The deal on February 5 was launched with a minimum size of only C$500m, taking advantage of a growing bid for public sector borrower paper in Canadian dollars. The timing was impeccable — it came shortly after the European Central Bank had announced its Public Sector Purchase Programme and the Bank of Canada had made a shock 25bp interest rate cut to 0.75% in January. The EIB’s attractive pick-up over the Canadian sovereign and Canada Mortgage Bonds drew Canadian investors into the book, as well as healthy international demand, and the deal grew to C$1.4bn.
Supranational and Agency MTN of the Year
€25m 2.777% July 2115
Goldman Sachs, HSBC
A reverse enquiry from a single French investor meant that SNCF Réseau was able to beat Belgium into the century bond club, issuing on July 17. A deal that had everyone in the medium term note market — and beyond — talking, it showcased what issuers can achieve with some smart thinking and a will to experiment in the privately placed market.
Sovereign MTN of the Year
Kingdom of Belgium
€50m 2.5% September 2115
Already one of the most innovative sovereigns in the market, Belgium knocked its curve into the next century with this 100 year note on August 26. Skilfully taking advantage of the fall in eurozone yields after the European Central Bank launched its Public Sector Purchase Programme a few months earlier, the sovereign found a willing buyer to add some length to its average duration after a reverse enquiry.