Public sector issuers back to the races as EU shows leadership
Issuer’s green tap sought to limit execution risk at a time of uncertainty for new issues
Since the collapse of Silicon Valley Bank on March 10 and the ensuing contagion that resulted in UBS’s rescue takeover of Credit Suisse, SSA bond funding has been limited to a handful of private placements in niche currencies and the odd deal from a German state.
Plenty of times a big SSA issuer like KfW or the European Investment Bank would bring the SSA new issue market back to life after a dormant period. But the volatility surrounding the banking crisis over the last couple of weeks were no ordinary circumstances and it shows the importance that the EU has assumed as an issuer that it took a long-dated €6bn pricing to get things going again and offer reassurance to the market.
The EU's borrowing programme is big enough that it is thought of as a "beast of its own" in the sector. The sheer size of its funding programme — €80bn in the first half of the year, the same as KfW’s full year target for 2023 — has catapulted it to the head of the pack.
Already its fourth public syndication of 2023, and the one that restarted the market on Tuesday, the €6bn tap of its 2.625% February 2048s demonstrated the leadership it has become known for.
The sale garnered over €73bn of orders at a limited new issue concession of 2bp, according to bankers off the deal. Issuers highlighted they expected to pay a slightly higher concession than normal given the recent volatility. In the end, the result was a boon to other SSAs waiting in the wings.
A slew of mandates has followed the EU's reopener with deals from Greece, Cyprus, the Flemish Community of Belgium, NRW.Bank, Société du Grand Paris and Land Berlin all in the market on Wednesday, across a range of maturities and products.
It is uncertain what premium smaller issuers will need to pay but with the EU having drawn something of a line under the banking crisis as far as the SSA market is concerned, at least they will be quick to find out.