Maturity: 26 September 2016
Issue/re-offer price: 99.838
Spread at re-offer: 19.9bp over the 4% July 2016 Bund
Launch date: Tuesday 19 September
Payment date: 26 September
Joint books: Citigroup, Commerzbank, DZ Bank
This benchmark is a core instrument, which we use to market our name to investors, whether it comes to benchmark issues or MTN trades. We were the first state in Germany in 1998 to start a dialogue with investors and have done a roadshow with every benchmark, mostly in Asia including Japan and sometimes the Middle East.
We tend to visit investors in Europe when there is demand and they want to see us.
Our strategy is different from some of the other German states. We have developed an international strategy to be independent from specific sectors or regions of investors. Other states have since followed such as NRW, Brandenburg and Berlin. It is important for us to have this international base, although the German investor base provides us a good back up for pricing.
As well as the benchmark programme, we also have access to MTN and CP funding which give us very good funding levels. We are the only state in Germany to have both a CP and MTN programme.
Japan is an interesting region for us since we do about 50% of our funding there. We have not been so active in 2006 as the levels have not been as competitive, but this is likely to change, and we had very positive talks with investors in Tokyo during the roadshow. Our yearly needs amount to Eu2.5bn-Eu3.5bn, although this is excluding turnover in CP.
The fact that we price our benchmarks fairly to ensure secondary performance means that it can be slightly more expensive. However, the fact that we can also price MTN trades at competitive levels makes it worthwhile.
We are always keen to look at new markets for issuance, some we have already used such as the Islamic bond market or the inflation linked market, others we are looking at but haven't issued in yet.
For example, if the pricing levels do not make sense, there needs to be another reason such as diversification, which we don't need at the moment.
The new government that came into place in April is committed to reduce net new borrowing to zero by 2010, and we believe it is committed to this target. The next few years will be a time of consolidation for us.
This has been a successful outing for Saxon-Anhalt. The order book was for almost Eu3bn — evidence of the quality of the name and the demand we see for rare names in this market.
We went out with price guidance of the 3bp through the mid-swaps area on Monday morning. We closed the books to European accounts on Monday afternoon, leaving it open for Asian investors as Monday had been a holiday in the region.
By the time we had closed the book on Tuesday morning we had orders totalling more than Eu2.8bn. The make-up of the book enabled us to price the transaction at 3.5bp through mid-swaps, equivalent to 19.9bp over the 4% July 2016 Bund.
German investors took about three quarters of the paper, the Benelux 6%, the UK and Ireland 6%, Scandinavia 5%, Asia 3%, France 3%, Italy 3%, Austria 2%, Switzerland 2% and others 1%.
Hypothekenbanks and Landesbanks were allocated 26%, banks 21%, insurance companies 20%, funds 20%, savings banks and co-operative banks 8%, and others 5%.
The deal is today (Thursday) bid about 1bp tighter. By way of comparison, the February 2016 Lower Saxony issue is trading at 6.75bp through mid-swaps.