The European Financial Stability Facility (EFSF) has made first assault on the public bond markets this week with a Eu5bn deal, sucking up a whopping Eu44.5bn book in the process.
It is just one of many new entrants to the market. With such a heavy amount of supply, issuers may have to fight to get attention in the markets — something they haven’t had to do in a long time.
FMS Wertmanagement and Erste Abwicklungsanstalt, the wind-down agencies for unwanted assets from Hypo Real Estate Group and WestLB are setting up MTN programmes, becoming the latest in a series of new issuers that will be making an appearance in the market in 2011.
And these new players mean business. FMS plans to raise between Eu20bn and Eu30bn of long term money this year. And it has just signed a Eu40bn ECP programme.
Caisse d’Amortissement de la Dette Sociale (Cades), although not a new entrant, has increased its funding plans for 2011. It is aiming to raise between Eu30bn and Eu35bn in long term funding — it plans to sell between eight and 12 US dollar benchmark deals to hit its target.
The diversity that these new entrants will bring to the debt markets will be welcomed by investors. However, the amount of agency funding that the debt markets will have to absorb this year could pose problems in both the short term and long term debt markets.
Many agency issuers have had a good crisis. Those in countries not affected by fears over their sovereign’s debt level have benefited from investor sentiment turning away from banks, as well as from peripheral issuers.
But these funding officers cannot rest on their laurels. They will have to work harder to get investors’ attention, and be wary of any signs of indigestion.