Structured callable dollar notes have been a popular yield enhancement product for investors in the past 12-18 months amid higher interest rates and higher volatility.
Several Washington-based supranationals have fielded an increase in enquiries.
A handful of European SSA issuers have also been active in the dollar callable market, though they tend to limit the maturities they offer, partly because it can be challenging for some bank counterparties to enter into long-dated cross-currency swaps.
Not all SSA issuers have the appetite to print callables as some are restricted by their own liquidity and capital frameworks but for those that can, there are clear benefits.
For one, funding costs are more favourable than printing a public bond, meaning a saving of several basis points and sometimes more.
Callable notes are also an opportunity for issuers to extend their duration profile, without having to commit to a benchmark-sized transaction.
Last, but not least, they allows borrowers to diversify their investor base and attract buyers they would not typically see in their public deals.
The most notable for many years were Taiwanese life insurers that bought large volumes of long-dated dollar callable Formosas, mostly in zero coupon format until around 2022, after which the pace of their buying collapsed.
Since then, Asian investors have remained the dominant buyers of dollar callables, though there has been a shift in the type and country of origin.
Many public sector borrowers say they have fielded an increase in enquiries from Asian bank treasuries — in some instances, demand is said to have risen significantly from Chinese bank treasuries.
Now, amid the seasonal rush in public market issuance in January, several issuers say they have reaped another reward.
Those same bank treasuries — some say galvanised by a shift away from US Treasuries — have resurfaced in public SSA bond deals, swelling order books and increasing the chances of secondary market performance.
SSAs issuers are being rewarded in the public market for the work they did with investors in the structured private placement market.