support European companies, health
interventions and the economy as a whole.
)TSûSUSTAINABILITYûAWARENESSûBONDû3!" û
eligibilities are being extended to areas of
%)"ûlNANCINGûDIRECTLYûRELATEDûTOûTHEûlGHTû
AGAINSTû#OVID
Leads BNP Paribas, Bank of America, DZ Bank
and JP Morgan started marketing the eight-
YEARûATûBPûAREAûOVERûMID
SWAPS ûTHOUGHû
books of more than €7.3bn meant the level
was tightened by 4bp.
“After the painful volatility we’ve had inrecent weeks, the central banks’
intervention has been supportive for the
technicals. It just took a while for the
CONlDENCEûTOûFEEDûTHROUGHûTHEûMARKET ûBUTû
now investors are chasing the market
again,” a syndicate banker said.
The playbook was the same for CEDB’s
SEVEN
YEARû#OVID
ûRESPONSEûSOCIALû
INCLUSIONûBONDû)NITIALûGUIDANCEûOFûBPûAREAû
over mid-swaps was moved by 4bp after
DEMANDûPASSEDûõBNûFORûTHEûõBNûTRADEû
via Credit Agricole, Citigroup, DZBank and HSBC.“The social element does help at the
margin in getting investors more engaged
but, at the end of the day, everyone is back
in the market; they’re in buying mode,” the
syndicate banker said.
!TûõBN ûTHEûTRADEûWASûTHEûLARGESTûSOCIALû
inclusion bond from CEDB, while the book was
the largest for any CEDB benchmark to date.
It helps that levels are so much wider.
#%$"SûõBNûNOTEûTHATûPRICEDûATûBPûTHROUGHû
mid-swaps in January was quoted at 3.8bp over
on Thursday, according to Tradeweb.32 International Financing Review April 4 2020Canadians shun domestic market
for deeper euros
SSA Single currency a haven in tough timesCanadian issuers took to the single currency last
week as challenging conditions in their domestic
market makes issuance difficult.
CPPIB CAPITAL INC, which also raised dollars,
was the first to emerge bringing a seven-year
green bond against an improving market
backdrop for public sector borrowers in the euro
market. It was quickly followed by QUEBEC and
the PROVINCE OF ONTARIO.
“Volumes have been quite challenged
domestically,” a DCM banker said. “It’s mainly
been private placements, not big new issues, so
euros and dollars could be attractive.”
“The domestic currency is getting beaten
up, so most of the provinces are trying to get
better funding than what they can in the local
currency,” a syndicate banker said.
Still, unlike European SSA names that are eligible
for the ECB bond buying, Canadians fall out of the
central bank’s remit, hampering some of the demand.
“There’s slightly greater price tension for
PSPP eligible names,” the DCM banker said.
KfW for example sold a €5bn three-year last
Wednesday 2bp tighter than guidance, printing
at 4bp over swaps on books in excess of €15bn.
“The Canadian provinces haven’t had the
same price tension,” he added.
“It’s not to say they’ve been bad transactions.
They’ve worked very well, but clearly the order
books haven’t been as large and investors have
been a bit more price sensitive. The only thing I
can point to is PSPP vs non-PSPP.”
The ECB has been buying a large amount of
public sector bonds in the secondary market and
is expected to continue doing so in the coming
weeks in an attempt to shore up the eurozone
against coronavirus fallout.RELATIVE SAFETY
But even though the likes of Ontario, Quebec and
CPPIB are not eligible for central bank purchases,
the euro market is offering relative safety.Leads Barclays, Bank of America, Citigroup
and JP Morgan started marketing CPPIB’s €1bn
no-grow at 50bp area over mid-swaps and
landed the trade at that level on books in excess
of €1.7bn.
“The green label definitely helped,” a lead
said. “I think this deal shows that there isn’t a
big gap between ECB-eligible and non-ECB-
eligible names. Every other non-QE-eligible
name should be pleased that CPPIB got a very
successful trade; it sets a good reference.”
Still, bankers away from the transaction
thought it was disappointing that the leads had
not been able to move the level tighter.
“We still rely a lot on bank treasuries because
that’s where the market depth is,” a second
syndicate banker said. “When you come in a part
of the curve which is mostly supported by bank
treasuries and you are not an HQ level 1 issuer,
then you have less depth and traction.”AND AGAIN
It was a similar tale for Quebec which priced its
€1.6bn deal in line with initial price thoughts of
swaps plus 45bp. Lead managers BNP Paribas,
Deutsche Bank, HSBC, JP Morgan and NatWest drew
€1.95bn-plus of demand (excluding JLM interest).
Bankers away from the five-year judged it a
hard sell. “In these markets some deals are just
scraping by – that one in particular,” said one.
A lead manager countered that the deal size
reflected “fair” allocation to its “high quality”
order book of central banks and bank treasuries.
“You’re not going into this deal unless you want
the bonds.”
Quebec enjoys the strongest following of the
Canadian provinces among euro investors, he
said.
The leads put the new issue concession at
20bp. They derived this by adding a margin to
what they regarded as out of date screen levels
for comparable Quebec debt.“The issuer was pragmatic in how they
approached the market to offset volatility in
secondary trading,” the lead said.GREATER DEPTH
For the Province of Ontario, which priced the
third Canadian trade of the week, demand was
once again reasonable rather than roaring.
Books for the €1bn deal closed over €1.4bn
through leads Barclays, BNP Paribas, HSBC, RBC
and TD. The spread was set at 58bp over swaps
from the outset.
“I think the funding levels are working well for
them versus Canadian dollars,” the banker said.
“Also, there’s still greater depth in euros than
in dollars. The premiums being paid are smaller
than in dollars, and there’s slightly greater
duration available in euros.”
Ontario’s deal was its first in euros since a
€1.5bn seven-year priced in April 2018.
That is not to say that the dollar market is
completely shut. CPPIB Capital Inc, which was
back with its second trade of the week with a
US$1.25bn two-year, saw good price tension for
its offering.
After marketing at the 35bp area over mid-
swaps, leads – BNP Paribas, Deutsche Bank,
Goldman Sachs and TD Securities – moved the
pricing to 33bp over. Books were more than
US$3.4bn and the issuer upsized the trade
from the US$1bn originally indicated.
The success of the recent transaction is
likely to draw other borrowers to the dollar
market bankers said, especially European
ones that have so far preferred to stay close to
home.
“If you’re European, you’ve basically got a
big bazooka behind you so it makes sense to
do euros,” the second banker said. “But there’s
a few issuers looking at dollars, especially as
the cross-currency swap market has settled.”
Julian Lewis, Helene Durand6 IFR Bonds 2327 p 25 - 65 .indd 32 03 / 04 / 2020 20 : 28 : 58