Nomura

Public sector borrowers this week set new landmarks in what has already been an exemplary year in dollars, as KfW sold the largest 10 year dollar benchmark in 2.5 years and the Nordic Investment Bank priced the tightest deal versus swaps of 2018 so far. SSA bankers are confident that conditions will hold at both ends of the curve — allowing the possibility of further long end supply and even lower short end spreads.

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Sterling issuance was thin this week relative to its scorching start to the year although there was still room for Kommunalbanken to print its largest ever deal in the currency. Strong supply is on the way from the UK Debt Management Office but while demand is as good as some bankers have ever seen, other deals may be limited by technical factors.

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Public sector borrowers wrapped up a trio of short end dollar trades on Tuesday, with the tightest issuer able to grind in pricing to the lowest level from an SSA this year and the higher yielding names finding ample demand despite ending up at similar spreads. SSA bankers are confident that the strong conditions will also ring true at the long end for KfW, which has mandated for its first 10 year dollar benchmark in nearly three years.

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.

Public sector borrowers are pouring into the three year part of the dollar curve after a series of issuers printed strong deals in the tenor last week.

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There have been high levels of issuance in the long end of the Aussie dollar curve this week, with a trade from KfW on Wednesday taking advantage of an increase in demand.

Dollar SSA deals are showing little signs of a hangover from a public holiday in the US on Monday, with all three of Wednesday’s trades well over subscribed and pricing inside guidance.

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.

A widening in dollar swap spreads since the end of last week should help support a trio of dollar deals on screens for Wednesday’s business, said SSA bankers.