Medium Term Notes and Private Placements

Investors are keen for structured medium term notes from supranationals and agencies, but the deals are hard to source, according to MTN dealers.

Brussels-Capital Region wants to raise €70m in private placements by April 8 but is receiving more inquiries for longer tenors than it wants to print. French regions could look to take advantage of the excess demand and print longer notes, according to medium term note dealers.

Canada is considering selling more euro medium term notes (EMTN) after dipping its toes back into the market for the first time since 1997. But bankers disagree over the level of investor interest the sovereign will find.

There was plenty of demand for long dated notes in sterling this week. While Mexico kept the public market busy, Transport for London took advantage of interest to debut in the private placement market with what bankers believe is the first 50 year sterling private placement since 2010.

There will be fewer private placements from Spanish regional issuers in the coming weeks, according to medium term note dealers. But the bankers are divided as to whether this is investor or issuer driven.

Agence France Locale (AFL), a new funding agency for French regions, is preparing a debut issue that could appear in the second half of the year. Bankers reckon the agency will likely find widespread interest from investors, particularly in the private placement market.

A pair of French regional issuers could soon join a German sub-sovereign in selling long-dated private placements in yen. Japanese investors are coming late to the party as the regions have already begun to extend their maturities.

A lack of investor interest in supranational and agencies’ traditional private placement formats is forcing issuers to sell deals in rare currencies and structures, according to MTN dealers.

Swedish Export Credit Corporation is keen to follow up its second ever privately placed dim sum this week with more deals in the currency, the issuer told EuroWeek. Meanwhile, its Norwegian neighbour, Nordic Investment Bank is also considering its first dim sum deal.

Bankers have lobbied supranational and agency borrowers for years to sign two-way Credit Support Annexes (CSAs) to overcome the ramping up of new issue swap hedging costs on primary bond business. It is a cost that has had senior SSA bankers fearing for the very life of the SSA bond business. But now the forces of Abenomics acting upon Japanese investor habits may drive borrowers to reconsider their swap arrangements putting to bed one of the longest running and fiercest debates in capital markets.

UK local authorities should follow the example of French and German counterparts and look to print private placements, MTN dealers urged this week.

Asian Development Bank sold its first Singaporean dollar deal in nearly six years on November 6 in a S$500m ($402m) private placement.