Guarantor: Federal Republic of Germany
Amount: ¥50bn global bond
Maturity: 16 February 2026
Issue price: 99.975
Spread at launch: 1bp over the 2% December 2025 JGB 284
Launch date: Wednesday February 8
Payment date: 16 February
Lead mgr: Morgan Stanley
Our Holy Grail is to be able to provide longer dated yen supply with a positive JGB spread for a top sovereign credit. You need not just the right name — but also the stars to align in terms of swaps, both interest rate and basis, to be able to achieve that positive spread and still reach borrowers' funding targets.
The demand for long dated yen has always been there. It is just a question of achieving the right numbers and this entailed moving relatively quickly as the swap market moved in line to executive the transaction.
The demand is led by the UK and Europe, supported by the US, and is almost exclusively from asset managers. These investors are global portfolios and run their portfolios on a multi-currency basis — they need a certain percentage of their assets in yen as a result.
This transaction provides great diversification away from the JGB market at a small positive spread. At the same time, when swapped into dollars or euros, it delivers KfW with its funding targets.
The orders were roughly half switches out of JGBs and half new cash.
The issue was brought at JGBs plus 1bp. At the time the EIB was trading at less 1bp.
"...a very odd configuration in that the group was only informed that they had retention bonds after the deal was launched and priced. In fact, the whole process is a little baffling.
The issue came on the back of a successful EIB transaction, which filled the majority of demand in the super long end of the yen market. As we are seeing little new cash coming into the market, I would be surprised if much of the transaction had been sold.
It looks as though it has been positioned to take advantage of competitive arbitrage levels at the super long end with a view to selling it down over a period of time.
At 1bp over the JL84, the issue is 0.5bp over the curve, which is a little on the tight side compared with EIB pricing at JGB flat and trading at less 1bp on the bid."
"...following the recent EIB 20 year, there was room for new issuance in the same maturity with some funds still looking to buy long dated yen product for quality triple-A names but I think KfW will have closed that window for a while.
We participated in the transaction as a co-lead and made some decent sales, selling quite a large block of the transaction, which meant we had to buy more bonds from the lead manager.
The pricing was fair. The EIB came flat to the curve and this offered a slight pick-up relative to EIB. At the same time, KfW achieved its target, which was probably Euribor less double digits."
"...the economic backdrop in Japan is lending itself to demand for longer dated yen. Only a few issuers can take advantage of this demand and it is limited to those that can issue in global format for which there is a broader investor base.
The EIB recognised that with its recent transaction and ongoing demand for paper there was room for another 20 year issue. KfW timed its deal perfectly to take advantage of that demand.
We had a ¥1bn allocation, which we sold easily into the UK, Germany and Switzerland.
The pricing looked a little tight as it did not offer much of a concession to the EIB initially but I am sure Morgan Stanley will have soft sounded the market sufficiently to know whether there was enough to justify the deal and at what price it would sell."
"...we had a ¥1bn allocation and have sold half of it with other orders that we expect to be confirmed by the end of the day.
The longer dated yen curve has been moving around, which has sparked interest from international investors. The EIB from a couple of weeks ago appears to be all sold, leaving room for another issue."
"...this issue is hard to fathom. EIB had absorbed all the demand for long dated yen and I didn't get the impression that the market was set up for another ¥50bn 20 year.
The EIB issue made sense because secondaries were trading rich and investors could sell secondaries and go into the EIB and make attractive trades. But with secondaries cheapening up, KfW did not have the same advantage and therefore was probably a much more challenging proposition."