“HUGE RESULT”
And while a lot of European issuers have so far
stayed on the sidelines because of the volatile
cross-currency swap market, there is huge
appetite for those willing to tap the currency.
This was obvious in the case of FMS
WERTMANAGEMENT, with interest in excess of
53BNû4HEû'ERMANûWINDING
UPûINSTITUTIONû
TIGHTENEDûITSû53BNûDEALûBYûBPûINû
marketing from initial price thoughts of
mid-swaps plus 25bp. This put the sovereign-
guaranteed credit at the same launch spread
as fellow Triple A issuer ADB a day earlier.
Lead managers were Barclays, Bank of
America, Citigroup and TD.
“It’s a huge result; we’re pleased for
them,” said one lead. “They’re not the most
frequent visitor to the market these days, so
you might have expected a bit more price
discovery or premium for re-entry. But that
wasn’t the case.”
7HILEû!$"SûHEFTYû53BNûORDERûBOOKû
ANDû53BNûISSUEûhSHOWEDûTHATûBIGûSIZESû
are possible in this product”, the arrival of
&-3ûLIKEûTHEû3%+ûTHREE
YEARûAûDAYûEARLIER û
marked a broadening of the issuer base.
ADB and other supranational deals were
boosted by orders from central banks of
some of the issuers’ member states,
ACCORDINGûTOûSOMEûSOURCESû!LTHOUGHû&-3û
LACKEDûTHISûBENElT ûITûALSOûACHIEVEDûVERYû
strong central bank participation, the lead
reported.EUROS
SOCIAL BONDS TAKE CENTRE STAGE IN
VIRUS RESPONSEThe EUROPEAN INVESTMENT BANK and COUNCIL OF
EUROPE DEVELOPMENT BANK drew strong orders
for their coronavirus response transactions
on Thursday despite almost going head-to-
head, as investors continued to take down
new supply with ease.
As Europe grapples with the best way to
tackle the economic fallout from the novel
CORONAVIRUSûINûAûUNIlEDûWAY ûITSûPUBLICû
sector entities have wasted no time in
getting on with funding the various
initiatives already underway.
“All these issues are very topical,” a DCM
banker said. “There is a question mark as to
what Europe is going to do, how it’s going to
respond to the coronavirus crisis. Will it be
%UROBONDS û7ILLûITûBEûTHEû%3- v
û&RENCHûlNANCEûMINISTERû"RUNOû,Eû-AIREû
SAIDûTHEû%UROPEANû3TABILITYû-ECHANISMû
should be made available as a source of
lNANCINGûTOûCOUNTRIESûWITHûONLYûMINIMALû
conditions attached and without stigma for
USINGûITû(EûSAIDûTHATûNEWûlNANCINGûOFûUPûTOû
€200bn should also be made available from
the EIB.
His comments followed those of Germany
and the Netherlands, which put a stop to theidea of a common debt instruments being
USEDûTOûlNANCEûAûEUROZONEûRECOVERY.
While the debate continues, issuers are
making the most of the strong market
BACKDROPûINûlXEDûINCOMEû
“The scale of monetary support is
extraordinary,” the banker said.
“Central banks have sprung into action a
lot faster than they did in 2008 and we’ve
BASICALLYûGOTû1%ûTOûINlNITYû!NDûWHILEûEVERYû
day the number of virus-related deaths is
GOINGûUP ûlXEDûINCOMEûISûEXTREMELYûWELLû
supported.”ROCKETING
There was certainly plenty of support for EIB
and CEDB, as well as NEDERLANDSE
WATERSCHAPSBANK, which raised a €2bn social
HOUSINGûBOND û.7"SûLARGESTû32)ûTRADEûTOû
date. The Dutch issuer found €2.8bn of
demand enabling leads Danske Bank, HSBC,
Morgan Stanley and NatWest Markets to move
THEûSPREADûBYûBPûTOûBPûOVER
h3OCIALûBONDûISSUANCEûHASûROCKETEDûSINCEû
the start of the year, and what was a very
SMALLûPARTûOFûTHEû%3'ûMARKETûCOMPAREDûTOû
green bonds is now much larger, and I don’t
expect this to stop,” the DCM banker said.
“Investors are interested to see these
social deals come; they’ve been very
supportive.”
The EIB has announced a package of
measures aiming to mobilise up to €40bn toInternational Financing Review April 4 2020 31BONDS SSAR“With the very big numbers around – another
€100bn from Germany and €100bn from the
federal states, €75bn–€95bn from Italy, £45bn
from the UK this month alone – it may prove a
good strategy to have got in early.”STRATEGIC SYNDICATION
Post explained the jumbo as being central to the
sovereign’s new strategy.
“Our estimates of the financial impact of the
corona crisis remain of course very uncertain,”
said Post. “So, we decided to go for a big
syndicated transaction now, flanked by an
increase in the number of OLO auctions this year
and higher issuance in our treasury bills.”
The decision on timing was related to launch
of the ECB’s PEPP.
“The whole market has of course started
anticipating heavier supply. We evaluated that the
starting days of the PEPP would be a good time
to execute this additional syndication and that
we would focus on our more traditional funding
instruments and tools afterwards,” Post said.
While Belgium usually launches new lines
through syndication, the maturity reflected
“the mix of measures taken by the Belgian
government to address the crisis – some of
which are of a more structural nature, some of a
temporary nature”, he added.“Also, given the BDA’s work over the past years,
where we significantly increased the average
maturity of our debt portfolio, our maturity
profile now allows us to go into slightly shorter
maturities, where a deeper mix of investors is
present – as this deal clearly showed.”
Looking ahead, the kingdom is open to foreign
currency issues.
“Our EMTN programme always offers us the
possibility to issue in foreign currencies and
we will, with our primary dealers, continue to
monitor those markets for issuance opportunities
if they are more attractive than our OLO curve.”
However, Belgium currently has no intention of
additional green issuance beyond the announced
planned increase through auction of its green OLO.ROUSING RECEPTION
Lead managers for the October 2027 bond
comprised Barclays, BNP Paribas Fortis, Credit
Agricole, HSBC and Morgan Stanley. Belgium’s other
primary dealers were invited into the syndicate.
Supported by the landmark order book, leads
tightened the jumbo 4bp in marketing to a
launch spread of 11bp over mid-swaps.
“We wouldn’t normally recommend tightening
4bp, but this is a recovering market with a lot of
new news and increased borrowing,” said the
lead manager.At launch, the deal offered a new issue
concession of some 8bp-10bp. Fair value was
around 1bp–3bp over the interpolated June 2027
and June 2028 OLOs.
While some syndicate sources away from
the transaction charged that it was priced too
cheaply, the lead defended the level.
“What they’ve done was very responsible,” he
said. “They had sight of demand from all types of
investors. They were very conscious of the need to
be coming back to their important investors and
have done everything they can to ensure decent
performance.”
The order book continued to grow despite two
rounds of spread tightening, the lead added.
While official deal statistics are not yet
available, real money participation was notable.
“It does feel like the real money component is
getting more comfortable,” said the lead.
The other elements of the BDA’s four-point
plan are three additional government bond
auctions in May, August and October; a halt to
buybacks of OLOs due in 2022; and an increase
in its activity in Treasury Certificates (bills in
maturities up to one year).
In addition, it remains open to so-called
‘Optional Reverse Inquiry Auctions’ of less liquid
bonds in May, August and October too.
Julian Lewis6 IFR Bonds 2327 p 25 - 65 .indd 31 03 / 04 / 2020 20 : 28 : 58