Inter-American Development Bank IADB

The sterling market for public sector borrowers is enjoying its best ever start to a year thanks to superlative conditions, Sonia linked debuts and a UK parliamentary vote on Brexit next week.

Sterling issuance from non-UK public sector borrowers has made by far its strongest ever start to a calendar year, with borrowers and bankers citing liquidity-laden investors and a crucial parliamentary vote on Brexit next week as factors behind the rush. Council of Europe Development Bank (CEB) and FMS Wertmanagement added to the feast on Thursday, while Inter-American Development Bank will bring yet another trade this Friday.

Public sector borrowers might switch some of their attention away from a rampant euro market towards dollars, said SSA bankers, after the Inter-American Development Bank and Caisse des Dépôts et Consignations brought strong trades in the currency on Wednesday.

The European Investment Bank and Bank Nederlandse Gemeenten showed the strength of the dollar market on Tuesday as they sparked the sector into life for 2019 with benchmarks offering minimal concession. Another pair of SSAs are hoping to emulate that success on Wednesday.

Supranationals found heavy demand from investors for privately placed taps of outstanding dollar and euro notes over the past week, with Asian Development Bank printing particularly heavy volumes.

This week's funding scorecard looks at the progress supranationals have made in their funding programmes.

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.

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.

Public sector bond market participants are growing increasingly frustrated at the pace of the implementation of Ester, the alternative euro risk-free rate to replace Euribor. Borrowers are unable to plan for, let alone issue, a bond linked to the benchmark without the rate being published by the European Central Bank. That leaves the euro far behind other markets where Libor is being replaced, writes Burhan Khadbai.

Rating: Aaa/AAA

Signs emerged in the SSA market this week that not all SRI bonds are equally worthwhile as far as investors are concerned, particularly when market conditions are not ideal. A series of bonds with a green label went through with little difficulty but a pair of social bonds were undersubscribed. Craig McGlashan reports.

Dollar investors gave public sector issuers something to think about on Wednesday, as a pair of SRI bonds had very different receptions. One aggressively priced deal struggled to reach full subscription while another offering some concession grew by a half. World Bank is up next in the currency, though in conventional format, and bankers believe the trade will indicate the market’s direction.