ESM-EFSF

The European Financial Stability Facility took a big bite out of the €5.1bn it has left to fund this year with a tap of its 2.625% May 2019s on Wednesday.

The European Financial Stability Facility (EFSF), which has received internal approval to raise the last chunk of its funding for the year, is most likely to plump for a three year deal to raise it, said bankers on Monday. Such a deal could produce its first benchmark reoffered at sub Libor levels.

The European Stability Mechanism is likely to price at close to the European Financial Stability Facility when it launches its inaugural bond, despite having a clearer structure, according to analysts.

The European Stability Mechanism, which has been roadshowing this week in London, Paris and Frankfurt, is expected to receive a warmer welcome than its cousin the European Financial Stability Facility has sometimes managed when it brings a deal.

If a country being touted as a bailout candidate just a few weeks ago can bring a dollar deal through its euro curve with a book nearly five times subscribed, then why aren’t other SSA names and their dealers pushing issuers to be more adventurous with prefunding for 2013?

The EFSF exploited investors’ hunger for new issuance on Wednesday to lop a €5.9bn slice off of its remaining funding task for the year. Bankers away from the trade pointed to a seemingly gratuitous order book and a hefty new issue premium to suggest the borrower had overpaid for the size but the lead managers defended both the premium and the pricing.

The EFSF will price a €5.9bn five year trade to sell on Monday afternoon. Despite tightening the guidance, the deal still looks to be coming at a considerable premium to the borrower’s curve — suggesting that the €11bn plus book has come at a cost even if a large deal size was the main objective.

Société Anonyme de Gestion de Stocks de Sécurité (Sagess) was overwhelmed with demand for a seven year deal on Monday, allowing the issuer to print at the tight end of revised guidance. The level of demand and restricted deal size made for a tough allocation process for the four bookrunners.

The EFSF is most likely to plump for a five year when it mandates for an expected benchmark early next week, SSA bankers told SSA Markets on Friday.

Last autumn the SSA market stood clear while the EFSF tried to ram a 10 year deal down investors’ throats. Next week’s anticipated five year EFSF deal should demonstrate how far the borrower has evolved.

The EFSF has despatched an RFP to dealers for a trade which is anticipated to come next week, and bankers expect the EU to follow with a benchmark after that. The two borrowers are among the few SSA names with much funding left to do before the end of the year.

KfW has mandated a trio of banks to run a seven year euro trade in what could be the only euro benchmark of the week.