INVESTORS PILE IN FOR NRW 10-YEARLAND NRW turned heads on Thursday with a
blowout tr ansaction as it continued to
build its curve with bonds that will fund
measures to tackle the coronavirus crisis.
4HEûSTATEûTESTEDûTHEûWATERSûWITHûAû
year trade and raised €3bn after it received
more than twofold demand.
“It was an insane transaction for a
federal state, they’ve never had that kind
of order book before. This is more
something you’d get for bigger agencies
like KfW,” a lead said.
.27ûISûRAISINGûFUNDSûTOûBACKû
CORONAVIRUS
LINKEDûlSCALûSTIMULUSû
packages. It came the preceding week with
õBNûFOUR
YEARûANDûõBNûSEVEN
YEARû
,3!SûATûMID
SWAPSûPLUSûBPûANDûBP û
RESPECTIVELYû4HEYûWEREûQUOTEDûATûBPû
and 25bp on Tradeweb, prior to the new
mandate’s announcement.
Guidance was at the mid-swaps plus
30bp area for a 2030 benchmark trade. The
order book grew past €4.5bn in under two
HOURS ûENABLINGûTHEûSTATEûTOûSETûTHEûlNALû
spread at plus 27bp, the same level as its
SEVEN
YEARû,3!ûLASTûMONTH
A second lead manager gauged the new
issue premium at 8bp and said that pricing
HADûSTARTEDûCOMPRESSINGûSIGNIlCANTLYû
compared with pre-PEPP levels.
“In the Laender space, issuers were
PAYINGûBPû.)0SûANDûNOWû.27ûISûCOMINGû
INSIDEûBPû7ELLûSEEûCONCESSIONSûCOMINGû
down as the market stabilises,” he said.
Investors piled in once the spread was
lXEDûANDû.27ûGARNEREDûAûlNALûORDERûBOOKû
of more than €6.75bn. Demand surpassed
.27SûûANDûûNOTES ûWHICHûDREWû
€2.2bn and €2.3bn, respectively.
A banker away from the deal said the
trade looked fairly cheap but that on the
BASISûOFûTHEûBOOKû.27ûGOTûITûWASûWELLû
worth it.
“It is a very successful deal. Looking at it
from the sides, I wish we had been on it,”
he said.
For the second lead, the key takeaway
was that aside from the usual participation
of bank treasuries, real money accounts
were also in the trade, which he said was
new for the space.
The banker away from the transaction
SAIDû.27SûFORAYûWASûAûPERFECTû
development for German states in terms of
securing longer-term funding for the aid
programmes they are setting up.
h)ûTHINKûWEûWILLûDElNITELYûSEEûMOREû
issues at that tenor – not a deluge, though
nûBECAUSEû
YEARSûISûMOREûOFûAûNATURALû
habitat for a federal state,” he said.
“At the same time, nobody wants to risk
HAVINGûTHEûlRSTûOFûTHESEûTRADESûTHATûDOESNTû
mYû7HENEVERûYOUûMOVEûOUTûINûTHEûduration of these bonds, you take the risk
that people will not jump in any more
because the risk gets too high,” he said.
"ARCLAYS û#ITIGROUP û,""7 û.AT7ESTû-ARKETSû
and TD were lead managers.HAMBURG DRAWS ROBUST DEMAND
WITH CONVINCING SIX-YEAR FORAYInvestor appetite for German regional debt
remains strong, and Monday saw the CITY
OF HAMBURG take full advantage with a
swiftly executed €750m six-year.
German states have been raiding the
market to back their coronavirus-related
stimulus packages.
h3OMEû,AENDERûHAVEûDONEûTHISûAûCOUPLEû
of times now, but for Hamburg it is the
lRSTûOFûTHATûCYCLE ûANDûINûTERMSûOFû
subscription it was the most convincing
one,” said a lead manager.
Hamburg announced guidance at mid-
swaps plus the 22bp area for an April 2026
benchmark bond. A banker away from the
deal said that looking at recent issuance
FROMû,ANDû.27ûANDû3CHLESWIG
(OLSTEIN û
the level was reasonable and that decent
interest meant it had scope for tightening.
4RADEWEBûQUOTESûPLACEDû.27SûRECENTû
April 2024 and March 2027 notes at plus
BPûANDûPLUSûBPûOVERûMID
SWAPS û
RESPECTIVELY ûWHILEû3CHLESWIG
(OLSTEINSû
!PRILûûPAPERûWASûQUOTEDûATûPLUSûBP
In the end, books closed at €2.3bn,
excluding lead manager orders. The
demand allowed Hamburg to print a
€750m bond at a spread of plus 20bp, 2bp
BELOWûINITIALûTALKû4HEûISSUEûOFFEREDûAûBPû
new-issue premium, according to a second
lead manager.
)NûCOMPARISON û.27ûPRINTEDûITSûõBNû
seven-year paper on March 24 with a
BPnBPû.)0ûANDûDREWûMOREûTHANû
€2.3bn in orders.
4HEûlRSTûLEADûSAIDûTHATû(AMBURGSûSIX
year was aligned with the recent German
Laender issues and that the “concession
thing” was a worn-out concept.
h)TûISûWATERûUNDERûTHEûBRIDGEû.27 û
Hessen and Bavaria have more or less
established a new Laender world which is
approximately 20bp up from pre-crisis
levels,” he said.
The banker away said the deal looked to
have been well placed.
“I guess this is where the new levels are
now, but we will have to see where we go
from here for this kind of credit,” he said.
However, the banker away thought that
Hamburg could have taken a bigger size.
“If you want to print as much as possible
you don’t tighten,” he said.
4HEûlRSTûLEADûSAIDûTHATûTHEûISSUERûMADEûITû
clear from the outset that the size would be
limited to €750m.“Of course, from the headlines, a lot
more could have been on the table. Other
RECENTûTRANSACTIONSûLIKEû"AVARIA û.27ûANDû
Hessen were ‘anything goes affairs’ and
THEYûPRINTEDûSIZESûOFûõBNûTOûõBN vûHEû
said.
h3O ûYES ûITûMIGHTûHAVEûBEENûAûWASTEûOFûAû
chance, maybe, but if the issuer demands
only €75Om, then it’s €750m,” he said.
Joint lead managers were Commerzbank,
DZ Bank, JP Morgan, NatWest Markets and
.ORD,"OEKB ON GUARANTOR’S COAT-TAILSOESTERREICHISCHE KONTROLLBANK successfully
followed its sovereign parent Austria in
the three-year sector with a twice
subscribed deal last week, a transaction
that soaked up leftover demand from the
precious week’s syndication.
Although sized at a hefty €5bn, Austria’s
shorter-dated tranche left much surplus
demand in its wake – having drawn
interest of €30bn.
OeKB’s deal was priced notably wider
than the sovereign’s launch level of mid-
swaps plus 2bp. Even after tightening 4bp
in marketing, lead managers Bank of
America, Deutsche Bank, Erste Bank and JP
MorganûSETûTHEûSPREADûATûBPûOVERûSWAPSû
The deal drew more than €3.6bn of
demand.
-ONIKAû3EITELBERGER ûDIRECTOR ûMARKETS û
at OeKB, said the issuer was encouraged to
come to the market this week having
observed the performance of Austria’s
transaction, and other successful European
trades from issuers such as NIB.
The deal exceeded OeKB’s expectations,
she said. “What was extremely nice to see
was that we could tighten the pricing in
these two steps of 2bp, and we actually
only had one investor drop once we
TIGHTENEDûFROMûBPûTOûBPv
3EITELBERGERûNOTEDûTHEûDEALûLANDEDûAROUNDû
23bp back of where Austria’s three-year was
trading, which was slightly tighter than
expected. Compared to where the republic
priced its transaction, it was a differential of 9bp.
3HEûNOTEDû/E+"SûLASTûDEALûWASûPRICEDû
BPûBACKûOFûTHEûREPUBLIC ûBUTûSAIDûTHEûNEWû
issue’s differential was more in line with
the pick-up OeKB had paid over the
sovereign historically.
OeKB could issue another benchmark in
THEûSECONDûHALFûOFû û3EITELBERGERûSAID û
“but depending on demand stemming
from the coronavirus response, we will
NEEDûTOûBEûmEXIBLEûASûTOûFURTHERûFUNDINGû
opportunities”.
“We are open to issuing private
placements and medium-term notes in
various currencies going forward,” she
said.36 International Financing Review April 4 20206 IFR Bonds 2327 p 25 - 65 .indd 36 03 / 04 / 2020 20 : 28 : 59