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An public sector issuer breaking a record with a deal this week became so common a claim it began to sound like, well, a broken record. But questions remain about how robust demand really is
Markets ‘not out of the woods yet’ as large sovereigns shorten execution process to de-risk issuance
Huge order book allowed the issuer to increase size of five year dollar trade
Issuer had already pre-funded in dollars earlier this year
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This week's funding scorecard covers, from a capital markets perspective, the major German Laender. The funding requirement covers each state's total funding requirement. However, the data on what has been raised so far only covers bond market funding and not Schuldscheine (registered bonds) or any other source of borrowing. Higher than expected tax revenues may well mean that the Laender do not have to reach their full funding requirements this year, say analysts. Estimates of total funding raised by the Laender are that none are below 50% done for the year with the average state having raised between 60%-80% of what it needs already.
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Berlin made a swift return to the bond market on Tuesday, selling six year floating rate debt to German bank treasuries and following up a seven year fixed rate note on Monday. The deal did not reach full subscription however, with investors holding out for higher yielding assets.
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The City State of Berlin sold a tap of seven year debt on Monday. Issuance from the Länder has been muted in recent weeks, owing to a combination of unfavourable market conditions and many investors winding down their bond purchasing for the summer.
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The State of Lower Saxony sold benchmark eight year euro debt on Tuesday, pricing the fixed rate bonds flat to its curve. The deal attracted a surprising amount of investor interest given the tight spread over mid-swaps, according to bankers close to the deal.
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Province of Ontario and KfW brought heavily oversubscribed dollar benchmarks at the short end of the curve on Tuesday afternoon, proving that there is demand for issuers in dollars if they are willing to pay a concession.
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Province of Ontario and KfW mandated banks for dollar benchmark on Monday afternoon. If the deals are met with a strong response, they could encourage other issuers to look to sell dollar issues next week.