ESM-EFSF
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The European Financial Stability Facility wrapped up its funding year by raising €4bn on Tuesday, tightening its pricing from guidance in the process. But despite the deal’s success, there are signs that the strength of the euro market is starting to wane into year-end. -
The European Financial Stability Facility has opted to tackle a part of the euro curve where KfW found substantial demand last week, with a trade that SSA bankers said should provide a steer on the health of the euro market. There was one positive sign for the sector on Monday, as a Dutch agency increased the size of an SRI bond from its initial target.
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The European Stability Mechanism’s second ever dollar benchmark scored an overall average of 6.83 on BondMarker, amid a general trend of lower scores from public sector borrowers.
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Investors were in defensive mode in the dollar market this week as they snapped up short dated trades and floating rate notes, with demand particularly heavy from central banks and official institutions. Bankers are hopeful that benchmark supply will return next week.
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The European Stability Mechanism priced its second ever dollar benchmark at a “fair” level of around 5bp over European Investment Bank’s September 2020, according to onlooking SSA bankers. Elsewhere in the dollar SSA market, Inter-American Development and NRW.Bank mandated banks for floating rate notes.
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The European Stability Mechanism mandated banks on Monday for its second ever dollar benchmark, following the launch of its dollar programme last year. The supranational will likely issue a size of $3bn to complete its funding needs for the year, according to SSA bankers.
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This week's funding scorecard looks at the progress of Europe's supranationals and agencies at the start of the fourth quarter.
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Public sector borrowers looking to issue at the long end of the euro curve will have to pay a sizeable new issue premium amid market volatility and the impending closure of the European Central Bank’s quantitative easing programme, SSA bankers have warned.
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The European Stability Mechanism completed over 50% of its funding target for the fourth quarter on Tuesday with its first three year euro benchmark since 2015.
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The European Stability Mechanism is likely to aim for the six to eight year part of the euro curve when it brings its first deal of the fourth quarter next week, said SSA bankers. The trade will likely face a more cautious investor base than the borrower enjoyed earlier in the year, they added.
