TD Securities
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Kommunalbanken has announced a dollar floater trade to launch on Tuesday, just ahead of the Federal Open Markets Committee’s rate decision on Wednesday. -
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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KfW on Wednesday posted a clear sign that the path to 10 year dollars is wide open for public sector borrowers, printing a $3bn global that was the largest trade in the tenor for 2.5 years. That left SSA bankers rubbing their hands and speculating over which borrower might come next.
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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.
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Kangaroo trades from KommuneKredit and Oesterreichische Kontrollbank (OeKB) suggest long end demand will hold pace in the Australian dollar market this week. This comes despite a spate of bad weather causing transport disruption in Tokyo, where many key investors in the market are based.
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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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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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Strong moves in the Mexican peso and the peso/dollar basis swap have ignited investor demand for bonds in the currency from SSA issuers that can offer a pick-up over govvies.
