L-Bank
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More issuers expected to print in US currency next week
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Issuers enjoy strong reception as whipsawing sentiment keeps market on its toes
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Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Monday, April 26. The source for secondary trading levels is ICE Data Services.
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German agency L-Bank steamed into the dim sum bond market on Tuesday to print what could be the start of a new flurry of offshore renminbi issuance.
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Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Monday, April 6. The source for secondary trading levels is ICE Data Services.
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Despite an unsuccessful experience in selling a trade through an auction in March, L-Bank’s international funding officer, Sven Lautenschlaeger, has not been put off by the format. He believes it is the best way to sell a bond as it gives investors the power to set the price.
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Few MTN issuers have so far issued in the Libor-replacing euro short term rate (€STR) format, with deals limited so far to supranationals, agencies and, this week, a sub-sovereign. Some bankers blame the 2017 EU Prospectus Directive for tightening up the rules on adding new indices to programmes, leaving non-exempt issuers on the sidelines.
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KfW returned to Polish zloty issuance last Friday after a 13 year absence from the market, as it looks to tap new sources of capital.
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While it is no surprise that a public sector borrower has brought the first floating rate note linked to the euro short term rate (€STR), it was a surprise that a small German agency would bring the inaugural transaction, especially as it is some weeks before the European Central Bank (ECB) is due to begin publishing the recommended new risk-free rate.
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L-Bank is preparing to issue a floating rate note linked to €STR, the recommended new risk-free rate in euros which the European Central Bank will begin publishing on October 2.
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As core markets in the northern hemisphere begin to cool, SSA issuers are looking towards an Australian dollar sector unaffected by the summer close.
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L-Bank issued its biggest single bond in dollars this week while the Inter-American Development Bank (IADB) printed its first ever dual tranche trade in the currency. But some market participants warned that the good times at the short end of the dollar curve might be coming to an end.
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SSA names found the going varied in dollars on Tuesday, with the Inter-American Development Bank only just covering the minimum size of its tightly priced short end trade while Land NRW and L-Bank saw chunkier demand.
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A trio of issuers burst into the sovereign, supranational and agency dollar market on Monday, as syndicate officials say they have been pleasantly surprised by how quickly the sector bounced back after a tricky period.
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Three SSA borrowers issued a total of £200m ($255m) of medium-term notes in response to an inquiry for three year non-call one fixed rate sterling bonds on Tuesday — which probably all sold to the same buyer — amid an uptick of paper in the currency.
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Issuers are showing the same kind of “greed” they did in the run-up to the global financial crisis, according to a fiery call to arms to treat investors better from a European agency funding official.
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L-Bank and the Province of Manitoba kept the dollar SSA market busy on Tuesday, launching deals totalling $2.5bn.
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The dollar sovereign, supranational and agency primary market has kicked off the week with an L-Bank mandate, as bankers continue to see little more than sporadic European SSA issuance in the currency in the weeks ahead.
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Dollar SSA issuance is expected to pick up next week, thanks to a change in the euro/dollar basis swap that is making issuance in the currency more attractive for euro funders. There was still a smattering of dollar trades this week, including a Sofr-linked floater that broke new ground for the format.
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L-Bank on Tuesday became the first SSA issuer to sell a Sofr-linked floating rate note with Reg S only documentation. The $500m no-grow deal had over $600m of orders, with $125m of those coming from the leads — which said any stock they were left with would be useful for providing paper to investors looking to test their Sofr systems in the coming weeks and months.
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L-Bank is set to bring the first ever Reg S only Sofr-linked bond on Tuesday. The German agency will be joined in the dollar SSA market by Japan Finance Organization for Municipalities, which has picked banks for its first benchmark of the calendar year.
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L-Bank will go on the road to promote the first ever Reg S dollar benchmark priced over the dollar risk free rate, Sofr.
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L-Bank will go on the road to promote the first ever Reg S dollar benchmark priced over the dollar risk free rate Sofr.
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Conditions for public sector dollar issuers held firm this week after an excellent start to the year, although deals were thinner on the ground thanks to a US Federal Open Market Committee meeting. Chinese New Year holidays next week will give the sector a much needed breather — after which three-years might move more into vogue than fives, said SSA bankers.
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L-Bank’s first dollar benchmark of the year was in keeping with a trend in the currency so far this year for oversubscribed deals with low concessions, as leads calculated a 1bp new issue premium for the deal.
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Kommunalbanken took advantage of being the sole SSA issuer in dollars on Tuesday as it was more than twice subscribed and tightened pricing on its first dollar benchmark of the year. Concerns over volatility from this week’s US Federal Open Market Committee meeting and non-farm payrolls kept some other issuers on the sidelines, said SSA bankers — although two are braving Wednesday’s market.
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The Bank of England on Thursday raised its base rate by 25bp to 0.75%, a move that was widely expected and one that brought next to no market reaction — keeping conditions calm for what could be a record year for SSA sterling issuance. L-Bank added to that tally on the same day with a deal that came 25% above its initial size target.
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After three sterling bonds this week from the eurozone, the cross-border issuance in the currency reached its highest ever year-to-date level, according to Dealogic.
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A slightly more hawkish than expected US Federal Open Market Committee meeting mid-week has nudged up US Treasury yields — bringing 10 year dollar issuance nearly within SSAs’ reach, said bankers. But in the meantime, SSA bankers are looking at the dollar pipeline with dismay.
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L-Bank has snuck in at the last possible moment before the end of a crucial US Federal Reserve meeting to raise $500m with a comfortably oversubscribed floater.
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Three public sector borrowers hit screens in sterling this week, including a rare floating rate note from the Province of Ontario, which made use of the currency for the first time in six years.