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
YOUûNEEDûTOûBE ûTHINKINGûPROCESSv
)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
PROGRAMMEûTHATûWEûHAVEûTOûMANAGEvBUYING 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 RochaBONDS
SSAR 27 Corporates 29 FIG 35 Covered Bonds 37 High-Yield Structured Finance Source: Refinitiv Eikon-40-35-30-25-20-15-10-5018/10/1718/12/1718/02/1818/04/1818/06/1818/08/1818/10/18PRICING 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”