NatWest Markets
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Spain’s 10 year benchmark weighed in at €10bn on Tuesday — its largest deal in four years — and drew an astonishing book of over €43bn. -
Kommunalbanken added to a stellar start to the year for sterling with a £350m trade — its largest ever trade in the currency. Cross currency basis swap levels meant the borrower capped the size of its deal despite building a nearly £550m book, according to leads — suggesting excess demand for other SSAs to tap this week.
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Spain, fresh from an upgrade to its Fitch credit rating, hit screens on Monday to announce a new 10 year euro benchmark. The sovereign will share the market with Agence Française de Développement (AFD).
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Sterling conditions are searing hot for public sector borrowers, with records breaking left, right and centre. And despite investors taking large volumes out of the market, SSA bankers are confident that more supply can be handled.
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Only a single issuer came to market in euros on Thursday. In what a banker away from the deal referred to as “good traffic control”, Austria had the market to itself for a €4bn 10 year.
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Big central bank and bank treasury demand, alongside good liquidity in the sterling/dollar cross currency basis swap and issuers’ willingness to print large deals, are driving the strongest ever start for the sterling SSA market — and a record trade for World Bank.
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The World Bank is set to become the latest public sector borrower to visit the sterling market, following the European Investment Bank’s £1bn trade on Tuesday.
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Execution in the euro SSA market keeps getting better. New issue premiums are sliding as market participants adjust to new yield and spread levels, according to bankers and issuers.
