The countdown to SSAs pricing through Treasuries

Triple-A rated supranationals have priced dollar benchmarks bonds at an average spread of 5.7bp over US Treasuries this year, up until June 1. This is down from 14.2bp in 2025 and 17.8bp in 2024, shows GlobalCapital’s Primary Market Monitor — a fall of more than two-thirds in two years, with most of the compression arriving in 2026.

That move has confounded the post-tariff consensus. “Expectations after the US tariff moment [in April 2025] were that investors would move to euros, and there would be a potential shift away from dollars,” says Antonio Gómez-Chaparro de Luna, vice-president, syndicate, debt capital markets at BNP Paribas. “But in fixed income, we very quickly noticed that what actually happened was not de-dollarisation but de-Treasurisation.”

What he describes is a reallocation within the dollar bloc rather than out. Investors are rotating out of US government bonds and into SSA paper, so that the spread they are chasing is shrinking.

“Investors are reallocating from government bonds into SSAs to diversify and also pick up a few extra basis points — though this is becoming ever more limited, especially in dollars,” says Gómez-Chaparro de Luna.

“In nominal terms it may not be large — the Treasury market is massive — but if a few investors do 5% to 10% more into SSAs, it grows quickly. We see it in the [order] books. It’s a mix of the same investors as two or three years ago, just placing much larger orders, and a growing participation from new Asian bank treasury investors. They know books are competitive and allocations are hard to get, so there’s a bit of [fear of missing out] — everyone piling in to get their hands on primary paper.”

Spreads at the front end of the yield curve have compressed furthest, PMM data shows. Triple-A rated supranationals priced benchmarks at an average 3.4bp over Treasuries in three year maturities across 2026 to June 1, down from 10.7bp in 2025 — close enough to flat that the question of an issuer pricing a bond at a negative Treasury spread has stopped being hypothetical.

By May, the best rated names carried a 2bp handle from the front end to the long end. The Council of Europe’s $1bn 4% May 2029 social inclusion bond was priced at 2.8bp, the Asian Development Bank’s $4bn 4.25% May 2031 at 2.86bp, and the World Bank’s $6bn 4.5% May 2036 sustainable development bond at 2.7bp.

The World Bank’s 10 year at 2.7bp shows how far spreads at the long end have travelled. Triple-A rated supranationals were landing 10 year paper nearer 8bp–9bp over Treasuries in January, PMM shows.

“SSA spreads are compressing towards the point where you ask when [one] actually will price through US Treasuries,” says Gómez-Chaparro de Luna.

Whether SSAs deserve to print there divides the buy-side. “There’s a split in investors,” says Gómez-Chaparro de Luna. “Some investors are more bullish and argue that, on credit alone — excluding the liquidity that Treasuries offer — some SSAs should price inside Treasuries.”

Others, weighing liquidity above all, baulk at the idea. “Some investors — especially bank treasuries buying for liquidity portfolios — say this is extremely tight, I don’t need it; why buy something less liquid than US Treasuries, even if the rating isn’t as high as a triple-A supranational?”

Alex Barnes, head of SSA syndicate at Citi, sees a floor rather than a frontier, for now. “It feels like we’re not quite there yet for a primary deal to print through Treasuries,” he says. “But I don’t rule it out at some point, though it probably needs a sustained period of evidence that if a deal prices in primary at a very tight level, or indeed moves there in secondary, it can hold that level for some time.”

Even in the secondary market, he notes, the tightest names had lately struggled to hold comfortably at a spread tighter than Treasuries plus 2bp, a level that behaves like a floor.

As spreads for the top tier of issuers have compressed, the bid has cascaded to other issuers — large, liquid triple-A supranationals such as the World Bank and European Investment Bank (EIB), which print the most frequently and trade the tightest — shows PMM data.

Issuers from outside the triple-A rated supranationals have priced at an average Treasury spread of 17.3bp this year, up to June 1, down from 26.1bp in 2024. Paper from that second tier of borrowers today offers roughly what tier one did at the start of the period.

“Those buyers [wanting double digits] are moving down to the tier two SSAs, which were still offering double digit spreads versus Treasuries late last year and are now in the high single digits,” says Gómez-Chaparro de Luna.

The result is a market compressing from both ends. “New SSA investors, and those who’ve raised cash by selling Treasuries, push the tight names down, while others buy the tight names opportunistically but move more cash up to the wider names,” he adds.

A striking feature of the grind tighter is how little it has cost issuers in terms of orders.

Subscription ratios on dollar SSA benchmarks averaged 4.3 times in 2026 to June 1, up from 3.1 times in 2025 and 3.4 times in 2024 — oversubscription has grown even as spreads tightened.

Barnes puts the durability down to the depth of the investor pool. “We are at a point now where there is a very large, deep pool of investors active in dollar SSAs,” he says. “The vast majority of issuers don’t need every potential investor in their name to be active on the day to see a very comfortably oversubscribed, very successful transaction.”

Asia has been replenishing that depth. “In terms of new investors, the most prominent have been Chinese banks that are a lot more active now than they used to be historically,” says Barnes. “The bank treasury universe as a whole just seems to get bigger and bigger.”

The inflow has offset the accounts that have stepped back. “There are some accounts, particularly central banks, that historically come and go in their activity. Some are certainly on the sidelines for now,” he adds, “yet there are plenty of other investors that are taking up the slack.”

Once committed, investors largely stay put. “I am struck by the healthy level of inertia from investors once they’re in the process and have committed an indication of interest, or an order, into the book,” says Barnes. “The majority of investors are remaining in the book after price revisions.”

Some attrition of orders, he adds, is no bad thing: “Some erosion in the order book is quite healthy and shows the limit of where the price can be taken.”

Issuers have read that strength and crowded into duration. Dollar SSA supply in 10 year maturities reached $32bn by June 1, already eclipsing the $31bn printed across the whole of 2025.

“It has been an incredibly strong year for 10 year supply so far,” says Barnes.

At the long end, the average spread on 10 year SSA bonds has tightened most in absolute terms, from 17.1bp over Treasuries in 2024 to 7.1bp this year. Yet it still offers the widest pick-up on the curve.

“There’s been so much 10 year supply that sevens to 10s is clearly very well bid,” says Gómez-Chaparro de Luna. “Sevens should perform well given the lack of supply. Ask an investor sevens versus 10 and they’ll say they’ll buy both, but prefer 10s for liquidity.

“Overall, the bid across the curve is extremely strong, but you can really push pricing versus Treasuries in the [10 year], all mainly driven by the higher rates environment. Ten year dollar issuances are also offering nice secondary performance post-issuance, promoting the return bid for other issuers,” he says.

A risk that lingers sits in execution. “In dollars, if swap spreads move, your book can crumble quickly, especially at very tight Treasury spreads,” says Gómez-Chaparro de Luna. “That’s why we’re reluctant to start at very tight Treasury spreads and prefer to begin a little wider, then tighten 3bp once the book is in.”

PMM data bears that out. The average move from initial price thoughts to reoffer widened to 3bp in 2026 from 2.6bp in each of the prior two years, while average new issue premiums held at just 0.7bp — the wider start a buffer against swap spread risk, not a concession.

“Last year the average move from start to finish in dollar SSAs increasingly became 3bp versus a historical average closer to 2bp,” says Barnes. “Even with incredibly tight Treasury spreads, we are still seeing similar spread moves from start to finish.”

Neither banker expects the second half of this year to break the pattern. “The market is just so resilient,” says Gómez-Chaparro de Luna. “Even the names where you wonder if you’re pushing it on pricing still fly and get a massive book, and if not massive, it still gets done.

“Dollar execution is a bit riskier because you depend on swap spread volatility through bookbuilding, but dollars is still the one to go to, and we’ve been trying to skew to more dollars where we can.”

Whether the negative Treasury spread milestone will be passed, Gómez-Chaparro de Luna is in little doubt. “I think it will happen on a rare occasion,” he says, “on a two or three year issue. You set the spread at near 1bp, swap spreads move the issuer’s way and it prices through Treasuries.”