The latest syndications from France, Italy and the UK this week broke issuer records for size, orderbook size, or number of investors taking part — and sometimes in combination. Elsewhere, the strength of demand allowed the European Investment Bank and the Asian Infrastructure Investment Bank to test fresh tights versus US Treasuries. British Columbia brought the biggest deal ever from a Canadian province.
Some market participants thought it was like being “back in January” judging by those results, the public sector bond market's busiest month of the year. That was also a time when records were broken almost daily. The difference this week is that there is war in Iran which looks like it will inflict pain on the global economy and spark inflation.
Issuers have taken advantage of two things lately to have achieved such staggering feats in the primary market. Deals have been fuelled either by attractive valuations versus peers, or issuers have leaned into pent-up demand.
The sovereign trio to have issued this week are among the highest yielding among their peers. Canadian issuers offer a spread pick-up in the international markets versus many other public sector names.
Meanwhile, the recent dearth of dollar issuance drove investors to gobble up scant fresh paper at tight spreads.
On the deals where valuations were tighter, orderbooks were more "realistic", as one market participant put it, such as those for KfW and Finland's recent deals and this week's other German bonds.
This shows that elements of the sovereign, supranational and agency investor base remain picky, sensitive to price and cautious of geopolitical and macroeconomic uncertainty.
Some investors have been reluctant to submit orders until after an issuer has fixed the spread on its deal as further proof of their caution.
Therfore, there is more emphasis than usual on the providing investors with clarity and assurance during bookbuilding.
Issuers that can offer that as early as possible have the best chance of the most success.