SSA issuers tipped to frontload once more as funding needs ramp up

Sovereign, supranational and agency bond issuers may have sailed through a string of market-moving events in 2025 — from US tariffs to commitments by Nato members to increase defence funding, to another change of government in France, to name a few — but market participants are far from complacent about the year ahead, with even more bond issuance likely to be required.

In GlobalCapital’s 2026 SSA market outlook survey, which closed on November 10, 65% percent of respondents believe 2026’s SSA issuance volume will be higher than in 2025. Forty-one per cent believe the increase will be less than 10% while 24% fear it could be more. About 35% think volumes will be roughly unchanged.

Issuance volume remains at the core of the SSA market dynamics, affecting issuance strategy and, to some extent, the direction of spreads.

“The main challenge for 2026 remains that it’s going to be busy — busier than this year even, as we are expecting an increase in overall SSA issuance volume by 5%-10%,” says Ioannis Rallis, head of SSA DCM at JP Morgan.

That will put the focus on issuers timing their arrival in the market and derisking their funding programmes as early as possible. “That means issuers will increasingly have to fight for the good windows,” says Rallis, “and it’s definitely advisable for them to take size when possible, and to frontload.”

Rallis believes market conditions in the first quarter of 2026 could be constructive, meaning issuers should not hold back if they have the chance to issue. “But you need to always be responsible with allocations and size,” he cautions, “instead of forcing it, which could be damaging.”

This year, some large SSA issuers like the European Investment Bank and KfW had wrapped up their benchmark funding for the year by September, much earlier than usual.

A large majority of survey respondents (87%) believe SSAs will be incentivised to frontload again next year, with 11% thinking they should do so even more aggressively than they did in 2025.

“We do expect to see a lot of frontloading again between January and June, and for September-October to be the last window for the larger transactions,” says Jens Hellerup, head of funding and investor relations at Nordic Investment Bank.

“There are too many known-unknowns — and unknown-unknowns — in the world, so it’ll be about trying to get funding done when there’s a good market.”

More issuance, and issuers’ desire to frontload their borrowing, are set to make for congested issuance windows.

Survey respondents chose “finding the right window and dealing with competing supply” as the top priority for SSA issuers in 2026, taking 33% of the votes. This was followed by diversifying into different markets (23%) and being willing to pay the right premium (20%).

“Issuance windows are getting much smaller and issuers need to be nimble,” says Mascha Ketting, senior funding officer at BNG Bank. “That’s been one of our core strengths and we’re going to continue doing that.”

Being nimble is also a key strategy for many others. “Finding the right window will definitely be one of the challenges for next year, but we saw this year that the market can absorb large volumes if the backdrop is constructive,” says Maximilian Plattner, director, treasury, at Oesterreichische Kontrollbank.

“There’s always the danger for the relatively smaller issuers as their deals might get lost on a crowded day. Being nimble is definitely an important part our strategy.”

In the face of fierce competition for investor attention, Hellerup says NIB will not automatically go for the most obvious issuance windows.

“There might be a better risk-reward using some of the less obvious ones,” he says, “when it comes to issuers like ourselves whose spreads are tighter and the deal sizes are smaller, because you don’t want your deal to get lost or appear optically too expensive on a busy day when investors are scrolling down a long list of new issues.

“Although, it does help that investors are aware that there are only so many chances to get our bonds each year.”

Manuel Valdez, director of debt capital markets and derivatives at Corporación Andina de Fomento, highlights the value of coordination between issuers.

“It helps that in the SSA community, issuers all know each other,” he says. “For us, it’s important not to step on other issuers’ toes by doing something at the same time that could potentially jeopardise both our and their trades. It’s about managing that, while making sure that you are not missing out.”

Several issuers tell GlobalCapital that improving the liquidity of their bonds is another key objective for 2026. This could help reduce the frequency with which they need to come to the market.

One of them is KfW, already one of the biggest and most liquid issuers in Europe.

“KfW has a very reliable and stable euro curve, and in our view — based on our own assessment and mirrored by trading desks — the European Union and KfW are the two most liquid SSA names in the eurozone, and we intend to keep it that way,” says its senior funding manager, Jörg Graupner.

“It’s probably the most important issue for me — to provide liquidity to our lines so that investors have the flexibility to buy and sell our bonds as they wish.”

Market conditions permitting, KfW is open to doing larger transactions.

“Our aim is not to open many lines, but big and liquid ones,” says Graupner. “There will be less no-grow language used, and potentially more dual-tranche structures. This will also help us not to be in the market too often.”

Another large German borrower, State of North Rhine-Westphalia (Land NRW), has a similar plan. Its head of treasury and pension fund Andreas Becker says the sub-sovereign wants to do bigger deals than it did this year, “including a couple of dual-tranchers,” he says, “so that we don’t have to come to the market every month which should make it easier not only for us but other Länder”.

Other SSAs with smaller programmes share that thinking. “We also want to continue to improve the liquidity of our bonds,” says Valdez. “Our benchmark deals are substantially larger than they were three or four years ago, and we don’t print anything less than $1bn anymore. All in all, we want to do bigger and more benchmarks.”

SSAs face steeper yield curves and tighter swap spreads in 2026. This means their overall funding costs, especially at the long-end, will increase.

Elevated government borrowing globally will drive these trends, which could mean SSAs shift their issuance to shorter maturities, with spreads staying squeezed to government bond benchmarks.

“The supply to come at the sovereign level is the most obvious factor affecting the curve, and I’m afraid the story of tightening versus govvies including US Treasuries is not going anywhere,” says Kerr Finlayson, head of frequent borrowers group syndicate at NatWest Markets.

“There’s also the steeper curve story, with the short end anchored by interest rates and the long end being pushed up by the fiscal situation. But the question is how dramatic the steepening will be. The belly, rather than the long end, is probably the one to watch and I’d suspect that’s where we see [the most] supply.”

The steeper curve means issuers present at the long end of the curve might want to do their long dated issuance early. Becker says Land NRW wants to issue its long dated bonds next year “as early as possible”. Land NRW is a renowned issuer in the 30-50 year part of the curve and of century bonds.

Harvey Bradley, co-head of global rates at Insight Investment, says the fiscal policy and government bond issuance narrative “isn’t just a focus for Q1 2026, but something for the medium-term”.

“It’s difficult to see how policymakers could change their behaviour to meaningfully rein in spending and the issuance associated with that,” he says. “It’s a theme that’ll play out over the next few years. And this will really prevent long ends from rallying much further than they already have, particularly in places like Europe, where it looks like the rate cutting cycle is done.”

However, sovereign issuers globally shifting their issuance shorter is a positive technical factor, he notes: “[It’s] something that we’ve already seen in the UK and very likely to happen in the US as well.”

Nevertheless, shorter issuance from governments is a key trend and might help prevent further curve steepening, “but the steepening is a theme we don’t see going away”, says Bradley. “In our view, the biggest steepening risk is in US Treasuries, in part because we do think the Fed will keep cutting rates.”

When it comes to investor diversification, which respondents voted as the second biggest priority (23%) for issuers in 2026, Ketting says that BNG’s strong presence across the globe and with that its ability to rely on a broad investor base are key.

“That’s why you see us active in various currencies across tenors,” she says. “Our funding strategy has always been assessing where investor appetite is and trying to match that with where we see the levels in euros and being flexible to get the most attraction for our trades.”

But it is not just issuers seeking to make new friends. Investors, especially in dollars, have also been looking for new debtors to entrust their money with.

“That was one of the reasons why we were able to set our 10-year dollar transaction in motion,” says Michiel Matthijssen, also a senior funding officer at BNG. “And the diversification needs from the dollar investor base remain an interesting theme for us to observe.”

Asian central banks and bank treasuries have also increased their demand for SSA bonds. KfW says it could issue more in Asian local currencies in both public and private formats in response.

CAF’s Asian investor base has grown “significantly” in both dollars and euros, says Valdez, with participation in its deals rising to 20%-27% this year from around 9% two years ago. “We try to do at least one trip to Asia, including Japan, each year and have also gone to places like Singapore and Malaysia recently,” he adds.

Issuers speaking to GlobalCapital highlight increased demand from Australia, Canada and Latin America, too. Issuers like CAF and Land NRW say they are monitoring opportunities to print in Canadian dollars as early as next year.

A long-running theme in the SSA bond market has been the quest of one of its largest issuers, the EU, to be viewed as a sovereign, rather than a supranational, issuer.

More than half (54%) of survey respondents think the EU remains a hybrid issuer, sitting between sovereign and supranational classification, but is now leaning more towards being judged a sovereign. Some 27% agree it is a hybrid but mostly a supranational. About 11% think EU remains a supranational, with 8% believing it should now be regarded as a pure sovereign.

When making its euro SSA supply forecast for 2026, Crédit Agricole saw the EU as “one moving part”. “While [NextGenerationEU] disbursements will [pick up] for the last year of the programme, it is likely that they will not reach the full envelope [of €806.9bn]. The question is thus by how much?” says Victor Tanguy in its SSA and covered bond research team.

“Then, if the EU will have to fund more for Ukraine — for example, if member states can’t agree on how to use the frozen Russian assets — then we could look at 5%-10% more issuance in euros compared to 2025. But in any case, the EU won’t exceed €160bn.”

In 2025, more index providers rejected the EU’s quest to have its bonds included in their sovereign, instead of supranational and agency, indices.

“The EU kept progressing as an issuer, and we are convinced that there are fewer and fewer reasons why they are not in the government indices,” says Patrick Seifert, LBBW’s global head of corporates and DCM. “True, they still don’t fit into the narrow definition of a sovereign, but there’s definitely more clarity on the EU’s increasing mandate.

“With the new [€150bn Security Action for Europe instrument] funding and the current negotiation on the next [Multiannual Financial Framework], they’ll have room to issue new debt for the next decade, plus all the refinancing that they’ll need to do. I wouldn’t be surprised if that puts them into the top three — and not just top five — most active sovereign issuers in Europe.”

In euros, 46% of those surveyed think SSA spreads could widen versus swap rates in 2026. The majority believe this widening will only be moderate, at just a few basis points (43%). Around 35% believe spreads should remain stable against swaps, and 19% think they could tighten.

“We expect the swap spreads to tighten in both five and 10 years, and possibly 30 year as well,” says Rallis. “Given spreads are already quite tight in places, SSAs won’t be able to perform in line with swaps, so there could be a slight underperformance of SSAs versus swaps and an outperformance versus Bunds,” he adds. “The EU is likely the exception, which is still attractively priced compared to the likes of KfW, so the EU’s curve could actually buck the trend and perform against swaps.”

Against Bunds, 59% of respondents think SSAs should continue to tighten — 38% believe spreads should stabilise near historical lows while 22% think they could even penetrate those levels. Of the rest, 30% think spreads should remain largely the same while 11% believe they could rebound from current tights.

“Spreads to Bunds are already near historical lows,” says Becker. He saw Land NRW’s five year bonds at 26bp-27bp over Bunds in early November, adding that they had not been as tight as 20bp or lower since 2021, and before that in the early 2000s.

“Spreads can certainly go down to those levels,” he says. “I have identified a lot of challenges for 2026, and spreads are definitely one of them. It could be tricky if our spreads to Bunds get too low. Our spreads to KfW and Rentenbank have been quite stable this year, but we all narrowed versus Bunds.

“The question is, for investors, if we go down below 20bp over Bunds, will that be enough to account for the liquidity differential between us and Bunds?”

But spread is not something an issuer can control. Rather, a mix of factors including Dutch pension sector reform, driving them into buying fewer long-dated bonds than before, and Bund supply, drive it. “What we can do, however, is to make sure that we find the right window so that our deals get recognised by investors,” says Becker, “which will be challenging because of the large amount of supply to come from within and outside of Germany.”

Many issuers — even those outside of Germany — price their euro bonds not only off swaps and Bunds, but also off KfW, which makes the German policy bank’s spreads to Bunds a key metric in 2026.

Graupner says KfW’s euro curve has room to perform versus Bunds. “Especially considering the supply to come from the [German sovereign],” he says. “It must be said, however, that we have come from exceptionally high levels. We expect our whole curve — which is up to 10 years — could trade between 13bp-14bp up to the high teens over Bunds.”

Rallis thinks there is more Bund issuance to come and while KfW could also fund more, the agency has the benefit of funding in different markets like dollars. “So KfW could outperform Bunds because of its relative scarcity,” he adds.

Then, there is the all-important question of how tight SSA spreads could grind towards US Treasuries. “Depends on which investors you speak to — some of them prefer more diversification away from US Treasuries,” says Hellerup. “We did a small survey with the banks and the views were 50:50 on whether supras can price inside Treasuries.”

In GlobalCapital’s own survey, only 25% of the respondents believe some SSAs could both trade and price flat or even inside Treasuries.

About 44% of survey respondents think that while SSAs could trade flat or through Treasuries, they will not price flat to or inside Treasuries. Meanwhile, 31% believe SSAs should continue to trade as well as price with at a positive spread to Treasuries.

“The baseline for SSA spreads to Treasuries has to be flat,” says Finlayson. “In theory, SSAs can trade through Treasuries, given they price off Sofr mid-swaps, but it does feel like a push too far. I think there’s a floor at Treasuries flat. But then, never say never. We’ve seen some strange things happen in the market.”