Sovereign, supranational and agency issuers stormed the primary market en masse this week, with a wide variety of borrowers taking advantage of a stable issuance window. But there remain signs in some issuers' deals that investors are wary of sentiment taking a turn for the worse.
This week's deals took place after the market took the initial failure of US and Iran reach a peace agreement over the weekend in its stride — something that surprised many SSA bankers.
“There wasn't a great deal of volatility, and that’s very different to what we've seen in previous weeks,” said a head of DCM. “It feels like we're heading towards a resolution [of the war] and the market is really looking forward and not backward.
“The market is seeing lights at the end of the tunnel, and kind of discounting the intraday rhetoric that gets sent out on social media.
The European Union and France syndicated new euro bonds on Tuesday, while the UK launched its first Gilt syndication of its 2026-27 fiscal year. The European Investment Bank also brought a dollar benchmark. Eight deals in core currencies, including a dual-tranche euro syndication from the Italy, followed on Wednesday and a further three on Thursday.
All the sovereign syndications this week broke new records. The dollar deals from the EIB and Asian Infrastructure Investment Bank also met huge investor demand despite coming tight to US Treasuries.
The sovereign trio currently offer investors the most attractive outright returns among European governments, with 10 year OATs yielding at 3.69% on Thursday afternoon, BTPs at 3.82% and the Gilts at 4.85%.
Some market participants have nicknamed the group 'BIF' for Britain, Italy and France, similar to how market participants lumped Portugal, Italy, Ireland, Greece and Spain together as ‘PIIGS’ during the eurozone sovereign debt crisis that peaked around 2010-2013.
While there was no shortage of demand for BIF bonds at such yields, one banker described orderbooks for other SSAs as “a lot more realistic” than what the market had seen earlier this year before the Iran war.
“We’ve definitely seen smaller size overall in the order books — KfW was a €5bn deal and the book was €15.5bn, though the quality was fantastic,” said a banker familiar with that trade. “But some large volume hedge fund orders have been less obvious in recent deals, and that's not surprising — the 5bp-10bp intraday moves in yields that we’ve seen made it much harder to pin down those.
“But markets have stabilised in the last few days and we have seen some of those orders come back in and clearly, if that stability continues, we'll see bigger order books again like we already are now.”
It does start to feel like the market is “back in January” in terms of book sizes, thought a banker after seeing the vast demand that this week's sovereign issuers attracted.
“True, there is a notable uptick in fast money and the better backdrop certainly helped, but it wasn’t just a fast money discussion — we’ve also seen a notable uptick is across all types of accounts," he said. "It’s a quantum of orders that are driving the books.”
Investors ‘insecure’
But bankers did not fail to notice certain “sensitivity” and “insecurity” among investors. This was prevalent in the bonds from issuers that trade at tighter spreads, such as those from Germany.
“While willing to play, investors are a bit more cautious now and they are committing only when they see the final spread,” said an SSA DCM banker. “We saw that from a few deals, including Berlin, with quite a material growth in the books after spreads were set.
“When we saw the bigger books at the start of the year we were also seeing 2bp or more price moves. But nowadays generally in the Länder segment for example, the spreads are not moving or by 1bp — less than we would see in a normal market.”
Price sensitivity aside, the banker acknowledged the market was functioning across the curve in euros and also in dollars.
“SSAs have weathered the storm very well," he said, "if you compare it to the higher beta asset classes like covered and senior non-preferred and additional tier one. You could argue KfW in five years barely moved and its 10 year maybe a couple of basis points,” said the DCM banker. “Everything we are now seeing is indicative of a risk-on environment. We are not out of wood yet, but we are on the right track.”
While the two-week US-Iran ceasefire expiring next week, US president Donald Trump on Thursday revealed a new 10 day ceasefire between Israel and Lebanon.
That may boost sentiment for next week and, with central bank monetary policy decisions due the week after, SSA issuers could crowd into the market in the next few days, thought a DCM banker at a large SSA house.
Speed still key
SSA issuers remain focused on speedy execution as a way to manage the risk of being in the primary market.
The UK started bookbuilding for its new Gilt at 8.30am this week, half an hour earlier than usual, while the timing in the past has typically been at 9am, followed by the first book update at 9.30 and book closing at 10am.
“The rationale for the earlier opening this time was very clear,” said a banker close to the trade, “which is getting the deal priced as quickly as possible to avoid any unexpected headlines or geopolitical news.”
Meanwhile, France’s new OAT was priced half an hour earlier than its February syndication and two hours earlier compared to its January deal, according to data compiled by GlobalCapital.
Italy had priced its new €17.5bn BTPs by around 12.30pm London time on Wednesday, unusually early for a dual-tranche transaction from the issuer. In January, it priced its €20bn two-part deal around 3.30pm. In 2025 the time of pricing was mostly between 2.30pm and 4.30pm, according to GlobalCapital data.
“The idea was always to execute as swiftly as possible and to be in [and out of] the market before any volatility came,” said a lead manager on the BTP. “We closed books earlier than we typically would, and it was also a reflection of the speed in which the orders came in and the quality of the books which allowed us to close relatively rapidly.”
Intraday, no more?
In a similar vein, there has been recent discussion about whether more SSA bonds could even be priced on the same day the mandate is announced.
Intraday execution tends to be carried out on smaller new issues in euros, including the recent €1bn 4.5 year from the State of Hesse and the €500m green bond from SNCF last Friday. Others, like State of Berlin this week, also contemplated the idea.
The debate is over whether the issuers with bigger euro deals, or even dollar bonds, could use the tactic.
“It’s absolutely true that this has been discussed repeatedly between issuers and banks, and it’s a balance between getting quick execution — and perhaps not getting the ultimate investor demand globally — versus sticking to tradition as most issuers do,” said a senior public sector origination banker, “particularly in dollars where you have an announcement one day and launch and pricing the next.”
“We’ve always done our deals with a two-day process but changing to one day is not off the cards,” said a frequent issuer from Europe. “We had that debate, and I’m sure others like KfW did too, on whether we should stick with the normal execution strategy.
“[But] we have a lot of investors outside of Europe, like central banks and some Asian investors, and we need to give them the time [to assess the trade]. The one thing you really don’t want to do is to give investors a good reason not to participate, so you want to change things as little as possible.”
But others doubt whether such a change would offer that much in terms of risk mitigation. “For euros, even when you announce on day one, real exposure is limited because you’ll only have guidance out there on day two and you can be in and out of the market in less than two hours," said the head of an SSA syndicate desk, referring to the large sovereign syndications. “That’s very concise execution already. I find the bar so extremely high for a move to pure intraday execution for a large sovereign. Until the point you put guidance out, you can still adjust things.”
Put a price on it
Other market participants wondered whether intraday execution was still necessary and agreed that it would be tougher to pull off for those issuers with more bonds to sell, who would have to pay up to bring in enough investors at speed. “Three weeks ago, I’d say absolutely, you should consider intraday, especially on the dollar side,” said a second SSA syndicate head. “[In euros], I think it’s challenging to have the EGBs come intraday without having them quite well flagged. Could the EU do it? Given the elaborate RFP process, it’s possible. Could EIB and KfW do it? Yes, but we are talking about much smaller sizes [than the sovereigns’].
“For a large EGB like France and Italy, missing out on that day one means you are missing the discussion with investors. You either take that overnight risk where you don't have a level out on screens, or you elongate the [bookbuilding] process by doing it intraday.”
KfW, which contemplated whether it should execute its €5bn five year deal last week intraday, thought the shortened approach would have direct implications on pricing. The issuer felt that it would have had to put around 1bp of additional new issue premium upfront to compensate for the shortened decision window for investors.
While expecting the “drive-by” euro SSA deals to continue to come to the market, for issuers, “it’s about that balance of you either shorten the execution and have to offer a touch more [in pricing], or you elongate the execution on that intraday process to take those basis points out,” said the second syndicate head. “But actually quantifying is a very arbitrary thing to do.”
Let’s see
Even though last week’s Ontario trade and the latest offerings from EIB and AIIB put dollar deals firmly back on the table for SSA issuers, and proved two-day dollar execution still works, market participants are aware that market volatility could flare up again at any moment.
“It would be interesting to see if we can map out how some of the core names could do intraday execution, because you’d go very early,” said a syndicate banker in London. “And because SSA deals are very well prescribed — with initial price thoughts on day one and a book update and the revised level at 8am UK time the next day — investors expect that update because there’s the signalling behind that as well. If they haven’t seen anything at 8.30, they begin to fret.”
For intraday execution to take hold, the first trades will have to come from one of the “super core names, like KfW, or maybe one of the Washington names,” the banker thought. “I wouldn’t be against intraday if it’s a Japanese SSA but for a Nordic, Dutch or French name they’d want to follow the lead of one of the core names. And given the volatility has also settled a little bit, I don’t expect it to be front and centre of discussions at this stage.”
