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EFSF shows it’s all about timing

By Craig McGlashan
06 Jul 2017

If ever there was an example of how much timing matters in the bond market, it was the European Financial Stability Facility’s dual tranche trade this week.

Bringing in a chunky book of over €6.6bn for a €3.5bn July 2048 — alongside €2.5bn of July 2025 paper — on Tuesday was an excellent demonstration of the opportunities afforded by the rise in rates over the last week. (See story on page three).

But with govvie yields spiralling further, the French sovereign suffered on Thursday as it drew weak demand during an auction for a bond of a similar tenor — perhaps indicating that investors feel long end government bonds have more value to give up than gain.

Timing, of course, is not really a luxury sovereigns have with their auctions — France picks its bonds a week in advance.

Many in the market reckon yields could hit a ceiling before long, with some suggesting that the European Central Bank may act to temper the growing expectation of QE tapering. It was just the opposite of that that started the rout last week, of course.

If rates do settle next week, then this week's issuance shows that borrowers with a need for some long end funding would do well to bring trades sooner rather than later. And not just in euros — as the Inter-American Development Bank proved a week ago, the 10 year part of the curve in dollars is also open.

With September set to be as busy as ever and a myriad of macroeconomic risks on the horizon, it would also be wise to stay open for syndication during the summer.

By Craig McGlashan
06 Jul 2017