The SSA market returned to work on Monday after a bruising week last week, with two euro issuers announced but no dollar deals.
The gentle start came after a week that saw US stocks sold off, Gilt yields surge, and both BTP-Bund and Bund asset-swap spreads drift wider.
“It was one of the toughest weeks that I can remember,” said a senior SSA banker. “Supply didn’t look particularly spectacular, and I know of a number of deals that were supposed to come out didn’t.
“There’s still this general bit nervousness in the market. There isn’t a huge pipeline between now and the year-end."
A second DCM banker said issuers can now afford to take a breather because most of them are 90% funded for the year after September. “The good thing from that is that especially in a market like this, you won't have too much supply to weigh it down further,” he said.
An SSA syndicate banker expects “a few bits and bobs” between Tuesday and Thursday this week, mainly concentrated in euros.
Two euro issuers have announced mandates so far. The Autonomous Community of Madrid, rated Baa1/A-/BBB, picked BBVA as green structuring advisor, alongside CaixaBank, Crédit Agricole, ING and Santander for a new seven year green benchmark that aligns fully with the EU taxonomy. Aa1/AA+/AAA rated IDB Invest, or the Inter-American Investment Corp, has named Bank of America, BNP Paribas, Deutsche Bank and DZ Bank as the leads for a sustainability bond, with investor meetings scheduled for Tuesday.
Two bankers pointed to the holidays in Asia for the slow dollar issuance in particular. “Both China and Korea are out today, so I wouldn’t expect a lot of people to look at dollars,” said the SSA syndicate. “There’s also the non-farm payroll number on Friday.”
China’s markets are closed between October 1 and 7 in celebration of the National Day. South Korea is off on Monday for the National Foundation Day.
But cost is another consideration, as GlobalCapital reported recently.
“A lot of issuers choosing between euros and dollars will be interested in euros because of the funding arbitrage,” the banker said. “The IDB euro deal could’ve easily been in dollars.”
A second banker put the cost differential between funding in dollars and euros down “in the teens" in terms of basis points, depending on the maturity and credit.
A highly-rated European SSA issuer told GlobalCapital last week that it is 20bp cheaper to stick to euros, and another said recently that the cost difference could be 30bp.
