Syndicate sources welcomed the deal
warmly too. “This was a very appropriate
trade in the current market – a perfect
choice for those investors who are still in
THEûMARKET vûSAIDûONEûOFlCIALûAWAYûFROMûTHEû
transaction.
Pricing compounded explicitly-
guaranteed Unedic’s rarity appeal, the
source away said. The source said that
relative value buyers also liked the trade.
“The size is liquid, a zero-weighted SSA at
mid-swaps plus is very rare and it has a lot of
spread over the curve,” said the source away
from the transaction.
Distribution was a fairly equal mix of bank
TREASURIES ûCENTRALûBANKSûANDûOFlCIALû
institutions, and fund managers, according to
the lead. While Europe inevitably dominated,
Asian participation in the deal was notable.
Fair value was around 13bp over, the lead
said. This put the deal’s new issue premium
at 1bp.
On the same day, the FREE STATE OF
THURINGIA raised €250m of 20-year funding
through a no-grow offering that achieved
the slightest of over-subscriptions with
orders of €260m-plus.
Lead managers BayernLB, Deutsche Bank, DZ
Bank, Helaba and NordLB priced the deal in
line with guidance at swaps plus 7bp.ESM FINDS THE GOING SLOW FOR
NEGATIVE-YIELDING 10-YEARThe impact of plummeting yields on the
European public sector primary market was
plain to see last Tuesday as a 10-year for the
EUROPEAN STABILITY MECHANISM, one of the most
deeply negative-yielding bonds in that
tenor, got stuck in the middle of guidance.
Negative-yielding debt is not new to SSAs
but growing fears that the coronavirus
epidemic could spread well beyond China
sent yields sharply lower last week.
The yield on the 10-year German Bund
was hovering around less 0.5% last Tuesday,
around 10bp lower than a week before.Given this backdrop and the tight spread
to Bunds, targeting the 10-year point in the
curve was seen as a brave decision by some.
h4HEû
YEARûISûDO
ABLEûBUTûDIFlCULT vûSAIDûAû
banker away. “Given how tight Bund spreads are,
that will take some investors away from the table.”
This greater price sensitivity was
evidenced by the issuer’s inability to move
the level to the tight end of the mid-swaps
minus 8bp area (+/-1bp WPIR) guidance on
its €2bn no-grow, with books topping
€2.5bn, excluding JLM interest.
The “will price in range” language was
seen as a necessary step given the volatility
in the market, giving as much clarity as
possible to investors.
“The problem is markets are moving so
quickly it can cause some headaches for
ISSUERSûLIKEû%3-ûTHATûHAVEûlXEDûISSUANCEû
windows,” said the banker away.
Despite the lack of price progression,
leads saw the negative yield and small new-
issue premium as indications of success.
h4HEû.)0ûISûPRETTYûlNEûANDûWITHûTHEûYIELDû
due to be set around -0.22%, I think this
could be the richest 10-year we have seen,”
said a banker on the trade.
In the end, the deal was priced with a
yield of -0.217%, matching the level achieved
by Land Hessen for a €500m 10-year in
September last year. The ESM’s spread
versus Germany was smaller, however, at
28.7bp, compared with 35.4bp for Hessen.
The relatively muted response contrasted
with that seen for ESM’s €3bn three-year earlier
in February. That deal was priced at less 0.455%.
Bankers offered differing interpretations
of fair value. Using the issuer’s own curve, it
was placed around less 12bp.
However, given the lack of liquidity of the
supranational’s €3bn 0.5% March 2029,
some preferred to look at other issuers.
“You would expect them to come at a
pick-up to KfW, so for me that is the
benchmark to use,” said the banker. That
OFlCIALûPLUMPEDûFORûFAIRûVALUEûATûAROUNDûLESSû
10bp to less 10.5bp.In January, the European Investment
Bank also sold a 10-year benchmark. The
€5bn 0.05% January 2030 came 10bp south
of swaps and was last week bid in line with
that level.
The ESM has now hit its funding target for
THEûlRSTûQUARTERû)TûHADûõBNûTOûRAISEûINûTHEû
lRSTûQUARTER ûITSûBIGGESTûFUNDINGûQUARTERû)TSû
needs over the next three quarters are
€1.5bn, €3bn and €1.5bn, respectively.
Barclays, Commerzbank and JP Morgan sold
last Tuesday’s trade.SIGNING UP FOR PRI
On Thursday, the ESM announced it had
signed up to the United Nations’ Principles
for Responsible Investment as it looks to
integrate environmental, social, and
governance considerations into its
investment practices.
As a PRI signatory, the ESM will include
ESG criteria within its investment processes.
The supranational also said it intended to
collaborate with peer institutions to
promote sustainable investment practices.
“We consider that adhering to the
Principles for Responsible Investment is an
important and positive step forward in our
institution-wide ESG efforts,” said Klaus
Regling, ESM managing director.
Since 2006, more than 2,900 investors
have signed up to the PRI, from over 50
countries representing more than US$90trn
in assets under management.
The ESM began preparatory work to apply
to the PRI a year ago.NON-CORE CURRENCIES
TCORP OPENS 2033 LINE FOR A$1bnNEW SOUTH WALES TREASURY CORP completed its
lRSTûDOMESTICûSYNDICATEDûSALEûOFûTHEû
calendar year last Thursday, raising A$1bn
(US$640m) from a new 13-year bond line via
CBA, NAB and UBS.International Financing Review February 29 2020 29BONDS SSARALL AGENCY BONDS IN EUROS
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues €(m) (%)Excluding equity-related debt. Including publicly owned institutions.
Source: Refinitiv SDC code: N61 Barclays 10 4,003.01 12.9
2 HSBC 10 3,827.67 12.4
3 JP Morgan 7 3,638.02 11.8
4 BofA 5 2,956.79 9.6
5 Commerzbank 5 2,603.59 8.4
6 Credit Agricole 10 2,379.17 7.7
7 Deutsche Bank 3 1,924.71 6.2
8 SG 6 1,818.79 5.9
9 BNP Paribas 7 1,776.23 5.7
10 Natixis 7 1,615.10 5.2
Total 31 30,947.46ALL SUPRANATIONAL BONDS IN EUROS
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues €(m) (%)Excluding ABS/MBS.
Source: Refinitiv SDC code: N51 Goldman Sachs 5 3,232.60 12.1
2 JP Morgan 5 3,083.30 11.5
3 Deutsche Bank 6 3,003.72 11.2
4 BofA 3 2,534.24 9.5
5 UniCredit 3 2,498.62 9.3
6 SG 5 2,281.46 8.5
7 BNP Paribas 4 2,035.03 7.6
8 Credit Agricole 3 1,763.08 6.6
9 Barclays 3 1,562.25 5.8
10 HSBC 2 1,513.69 5.7
Total 16 26,771.77MUNICIPAL, CITY, STATE, PROVINCE ISSUES IN EUROS
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues €(m) (%)Excluding ABS/MBS.
Source: Refinitiv SDC code: N71 UniCredit 8 2,165.43 19.9
2 DGZ-DekaBank 7 1,009.09 9.3
3 Nord/LB 7 988.43 9.1
4 Barclays 3 624.86 5.7
5 LBBW 4 578.69 5.3
6 HSBC 4 576.52 5.3
7 Deutsche Bank 5 533.87 4.9
8 DZ Bank 5 512.11 4.7
9 Hessen-Thueringnen 4 447.78 4.1
10 JP Morgan 1 424.77 3.9
Total 19 10,897.656 IFR Bonds 2322 p 25 - 43 .indd 29 28 / 02 / 2020 19 : 15 : 31