IFR International - 03.11.2018

„ FRONT STORY SSA

Change in tide as KfW prices euro jumbo

KfW goes for size over price

Tight deals fail to enthuse

The extent of the repricing the euro public
sector market has gone through over the last
12 months was plain to see last week when
KFWûPRICEDûAûõBNûlVE
YEARûSOMEûBPûWIDERû
than a comparable trade in 2017.
4HEû'ERMANûAGENCYûPRICEDûTHEûDEALûATû
BPûTHROUGHûMID
SWAPS ûOFFERINGûBPûOFû
NEWûISSUEûPREMIUM ûWHICHûHELPEDûDRAWû
books over €12bn.
It started at swaps less 19bp area via
Citigroup ûHSBC and NatWest Markets.
h3TARTINGûATûLESSûBPûAREAûWASûAûDECENT û
DECENT ûDECENTûCONCESSION vûSAIDûAûBANKERû
AWAY

0UBLICûSECTORûISSUERSûHAVEûHUGELYûBENElTEDû
from the European Central Bank’s Public
Sector Purchase Programme under which the
central bank has bought over €2trn of bonds.
(OWEVER ûTHISûISûSETûTOûENDûINûJUSTûOVERû
eight weeks and investors have been
positioning ahead of that.
h7EûCANûSEEûTAPERINGûINûFULLûFORCE vûSAIDûAû
SECONDûBANKERûAWAY
h.OTûLONGûAGO û+F7ûWOULDûBEûWONDERINGû
WHETHERûTOûBRINGûAûDEALûATûLESSûBP
BPûANDû
look at the last basis point. We are not in that
MINDSETûANYMOREû)TûISûNOTûABOUTûSAVINGûTHEûLASTû
BASISûPOINT ûWEûAREûMOREûINûAûHOWûGENEROUSûDOû
YOUûNEEDûTOûBEûTHINKINGûPROCESSv
)Nû/CTOBERû û+F7ûPRICEDûAûlVE
YEARû
TRADEûATûLESSûBPû3INCEûTHENûITûHASûWIDENEDû
ANDûWASûBIDûATûLESSûBPûLASTû&RIDAY û
according to Tradeweb.
7HENû+F7ûRETURNEDûTOûTHEûTENORûINû
-ARCH ûITûPRICEDûATûLESSûBPûANDûINû*UNEûATû
LESSûBPû)TûTAPPEDûTHEûTENORûATûAûTIGHTERû
SPREADûINûMIDû/CTOBER ûALTHOUGHûITûWASûNOTûAû
WIDELYûDISTRIBUTEDûõBNûINCREASE

“It is interesting to see the extent of the

repricing...If the deal hadn’t worked at this

LEVELûLESSûBP    ûTHENûWEûWOULDûHAVEûAû

PROBLEMû)TûWILLûCOMEûWITHûAûPOSITIVEûRATEû

WHICHûITûDIDNTûLASTûYEARvûAûTHIRDûSYNDICATEû

BANKERûSAIDû4HEûDEALûOFFEREDûAûûYIELD

&ORû+F7SûHEADûOFûCAPITALûMARKETSû0ETRAû

7EHLERTûTHEûMARKETûISûINDEEDûHEADINGûINûAû

NEWûDIRECTIONûWITHûANûADJUSTMENTûTHATûUSUALLYû

HAPPENSûINû*ANUARYûALREADYûUNDERWAYû!TûTHEû

ENDûOFûTHEûYEARûSHEûSAIDû+F7ûSPREADSûTENDEDû

TOûBEûTIGHTERûTOûLATERûREADJUSTûINûTHEûNEWûYEAR

h)NûPRINCIPLEûTHEûEUROûMARKETûISûADJUSTINGû

TOûAûNEWûENVIRONMENTûNEXTûYEARûWHEREûTHEû

0300ûISûRUNNINGûOUTvûSHEûSAID

“You could do a small transaction on the

SECONDARYûCURVEûBUTûIFûWEûDOûAûõBNûBONDûOURû

INTERESTûISûTOûHAVEûTHISûBONDûPICKEDûUPûBYû

MARKETSûASûSOONûASûPOSSIBLEû7EûAREûVERYûCLOSEû

TOûMARKETSûSOûOFFERINGûAûDECENTûPREMIUMûISû

reasonable in the current market environment

and given the annual sizable funding

PROGRAMMEûTHATûWEûHAVEûTOûMANAGEv

BUYING THE NIP

+F7SûTRADEûRECEPTIONûCONTRASTEDûWITHû

TIGHTLYûPRICEDûFINNVERAûWHICHûSTRUGGLEDûTOû

DRUMûUPûSUFlCIENTûINVESTORûDEMANDûLASTû

7EDNESDAYûFORûAûNO

GROWûõMû

YEARû

Books were last communicated at over

õMûWHENûTHEûSPREADûWASûSET

4HEû!A!!ûRATEDû&INLAND

GUARANTEEDû

AGENCYûSTARTEDûMARKETINGûATûBPûAREAû

THROUGHûMID

SWAPSûVIAûCitigroupûDeutsche

Bank and HSBC.

3OMEûTHREEûHOURSûLATERûTHEûSPREADûWASûSETû

INûLINEûATûLESSûBPûLEAVINGûLITTLEûTOûNOû

concession on the table.

h&INNVERASûCURVEûISûVERYûmATvûSAIDûAûLEADû

h)TûISûAûNAMEûONûTHEû0300ûLISTûWHICHûLEADSûTOû

AûDISTORTIONûINûTHEûSECONDARYûMARKETv

)TSûõBNûû!PRILûSûWEREûBIDûATûLESSû

11.5bp at the time of pricing and its €1bn

û*ULYûSûATûLESSûBPûACCORDINGûTOû

Tradeweb prices.

&INLANDûITSELFûALSOûHASûAûmATûCURVEû

meaning that Finnvera trades at a similar

PICK

UPûOVERûTHEûSOVEREIGNûACROSSûMATURITIES

4HEû&INNVERAûSûFORûEXAMPLEûWEREûBIDû

SLIGHTLYûOVERûBPûBACKûOFûTHEû!PRILûû

2&'"ûWHILEû)&2ûCALCULATIONSûPUTûTHEûNEWû

bond 19bp cheap to the curve.

h4HEûEUROûMARKETûISûOPENûBUTûINVESTORSû

AREûVERYûVERYûSENSITIVEûABOUTû.)0SvûSAIDûAû

lFTHûBANKER

4HEûLASTûISSUERûTOûJOINûLASTûWEEKSûSUPPLYûOFû

euro conventional deals was CITY OF HAMBURG.

)TûSTOODûSTRONGûlNDINGûDEMANDûOFûõBN

PLUSûFORûAûû

YEARû,3!

&ORûAûSIXTHûBANKERû(AMBURGûWORKEDû

BECAUSEûITûMANAGEDûTOûIDENTIFYûANû

undersupplied part of their curve.

h4HEREûISûAûBITûOFûSCARCITYûINû

YEARûPAPERûYOUû

AREûHITTINGûALMOSTûAûûYIELDûWHICHûISûQUITEû

ATTRACTIVEûFORûPEOPLEûLOOKINGûFORûYIELDvûHEûSAID

The new deal priced in line with guidance

at swaps plus 3bp via BayernLBûDZ BANKû

HSBCûNatWest Markets and Nord/LB.

Priscila Azevedo Rocha

BONDS

SSAR 27 Corporates 29 FIG 35 Covered Bonds 37 High-Yield  Structured Finance 

Source: Refinitiv Eikon

-40

-35

-30

-25

-20

-15

-10

-5

0

18/10/1718/12/1718/02/1818/04/1818/06/1818/08/1818/10/18

PRICING SHIFT

KfW’S €3bn DECEMBER 2022

BP

“Not long ago, KfW would be
wondering whether to bring a

deal at less 34bp-35bp and look

at the last basis point. We are
not in that mindset anymore.

It is not about saving the last

basis point, we are more in a

’how generous do you need to
be?’ thinking process”

“You could do a small

transaction on the secondary

curve, but if we do a €5bn bond,

our interest is to have this bond

picked up by markets as soon

as possible. We are very close

to markets, so offering a decent

premium is reasonable in the

current market environment

and given the annual sizable

funding programme that we

have to manage”