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Don’t start grumbling about the NIP

Rocky mountain landscape in the summer

Pay up, the path ahead is not smooth

CEEMEA issuers have returned in droves, moving even quicker in January than in previous years. This is a positive development but borrowers risk sliding back into hesitation as new issue premiums come down amid talk of a better EM outlook this year.

It has been a welcome relief to see CEEMEA issuers returning to the market in a strength not seen for months. Taking advantage of investors’ new year cash piles and a recent more stable US Treasury market, borrowers have been quick to move to tap the market, with three CEE sovereign issuers even printing before their orthodox Christmas on January 7, a date that has in previous years acted as a barrier to bonds from this region.

In the first week of business this year, $9.68bn of CEEMEA bonds were printed, more than double the previous five year high set in 2021 and well on the way to surpass the $35.59bn January record laid down that year.

In doing so, CEEMEA issuers seem to have undergone something of a metamorphosis in attitudes during the last year of volatility. Where previously, more often than not, issuers were accused of being slow to make decisions and too concerned with new issue premium numbers — rather than making a fuller risk/reward analysis — most have now become more keen to take the windows on offer. The grumbling about the cost compared to secondaries too has eased off.

But this transformation risks being temporary. Already this year we are hearing of issuers putting those new issue premium numbers back under the microscope, especially envious as some borrowers such as Slovenia pull off very tight prints once again. Syndicate bankers are having to dust off their smoothest talk and most detailed number crunching as they argue that a new issue premium number was actually not quite as wide as others suggest. The mantra of last year — that any deal done is a good deal — has already gone.

While of course a capital markets publication will not condone a lack of solicitousness over the detail of deals, it is easy to see how easily issuers can go from being keen to pay up to issue now and safely tuck money away, to so worried that they can get a bond cheaper in a few days or weeks that once again deals are delayed.

That would be an error. While the start of this year is better and bulls are back, EM is not fixed. The war in Ukraine, especially, is far from over and as was made very clear last year, that war has global effects on EM as well as the more localised ones on the CEE. An escalation is not off the table.

There is no guarantee that what we are seeing at the start of 2023 is the start of a better year and not just a pause in the worst of the worries. Issuers should play it safe and not waste this golden time fretting about overpaying.