Euros are king as basis moves
against dollars
ADB and BNG issue in single currency
Two issuers turned to the euro market on
7EDNESDAY ûPROlTINGûFROMûAûMOVEûINûTHEû
euro/dollar basis swap that has soured the
taste of dollars for SSA borrowers.
The ASIAN DEVELOPMENT BANK priced a €600m
seven-year Green bond 1bp inside guidance
at swaps less 17bp, while BANK NEDERLANDSE
GEMEENTEN took €1.75bn out of the market
WITHûAûlVE
YEARûBENCHMARK
h!$"ûISûAûGOODûEXAMPLEûOFûAûDOLLAR
BASEDû
issuer looking at euros,” said a banker away
from both trades. “The moves in the basis
mean dollars really don’t look attractive
against euros unless you go short.”
Bart van Dooren, head of funding and
investor relations at BNG, calculated the
price advantage of issuing in euros versus
dollars at 10bp.
“Big move over the last weeks in euros/
DOLLARSûANDûTHEREFOREûAûDOLLARûlVE
YEARûISûTOOû
EXPENSIVE vûHEûSAID
4HEûlVE
YEARûEURODOLLARûBASISûHASûMOVEDû
from -23.25bp at the beginning of June to
-15.125bp, according to Thomson Reuters
data.
A second banker said the basis moves are
Aû53ûDOLLARûSTORY ûPOINTINGûASûANûEXAMPLEûTOû
a similar shift in cable basis that has made
swapped sterling issuance attractive relative
to the greenback.
(EûSAIDûPOTENTIALûEXPLANATIONSûWEREû
falling dollar FX reserves of central banks
ANDûTHEûIMPACTûOFû53ûTAXûLEGISLATIONûONû
funding activities of, say, European banks’
US branches.
“I personally see a correlation between
4RUMPûPOLITICSûTRADEûWAR!MERICAûlRST ûANDû
the move ... in the absence of a further/
deeper EU crisis and amidst continued US
politics I would assume the trend will
continue,” he said.
“But I know so many models that are
perfect in analysing why the basis moved as
it did, but all typically fail to forecast the
future accurately,” he said.
A third banker said there is little incentive
for issuers to look at dollars at the moment
given the relative attractiveness of euros,
while investors have also shown good
appetite for the common currency.
“Issuing in dollars is not optimal,” said the
third banker. “Investors like euros, too.
+EXIMûWASûABLEûTOûMAKEûAûBPûREVISIONv
4HEû%XPORT
)MPORTû"ANKûOFû+OREAûSOLDûAû
€750m July 2023 note at swaps plus 43bp on
Wednesday, inside IPTs of plus 55bp area.
".'ûTIMEDûITSûTRADEûTOûlTûINûAHEADûOFûTHEû
EUROPEAN FINANCIAL STABILITY FACILITY, which has
SENTûANû2&0ûFORûAûBONDûTOûBEûSOLDûNEXTûWEEK
".'ûCHOSEûTOûHITûTHEûlVE
YEARûPOINTûFORû
THEûlRSTûTIMEûSINCEûAûõMû32)ûOFFERINGûINû
2015.
It garnered 56 orders, and pricing came in
line with guidance at swaps less 16bp.
Van Dooren calculated the NIP at 5bp.
“Nice start to the second half of 2018,” he
said.
4HEûDEALûCAMEûAFTERûAûDIFlCULTûTRADEûATûTHEû
beginning of the year, when BNG struggled
to get critical mass for a €500m 10-year,
printing off books of some €490m - which
included €100m of joint-lead manager
interest.
h4HEûlRSTûATûTHEûBEGINNINGûOFûTHEûYEARûWASû
directly on the line - no NIP for 10-years was
not the right decision,” said the third
banker. “But here they wanted to take size,
and swaps less 16bp looked very fair.”BNG has completed just over €11bn of its
€18bn funding programme for the year.
ADB had books of over €750m for its
Green bond. The proceeds will support low-
carbon and climate resilient projects funded
through ADB’s ordinary capital resources
and used in its non-concessional operations.
The issuer aims to raise US$6bn climate
lNANCINGûAûYEARûBYûû)TûSOLDû53BNûINû
2017, a 21% increase from the previous year.
The development bank was also active in
the Australian dollar and sterling markets
last week. It sold a A$150m June 2029 note
and tapped its £350m December 2023s for a
further £100m.
ADB plans to issue about US$23bn
through the capital markets in 2018.
Lead managers for BNG were Credit
Agricole, Goldman Sachs, HSBC and TD.
Bank of America Merrill Lynch, Citigroup, and
Credit Agricole managed ADB’s trade.
Robert HoggWEEK IN NUMBERS
2.56%
THE SPREAD BETWEEN 10-YEAR
TREASURIES AND 10-YEAR BUNDS
DEMONSTRATING THE DIFFERENT MONETARY
POLICY STANCES OF THE FED AND ECB€1.5bn-plus
DEMAND FOR INTESA SANPAOLO’S
€1bn JULY 2025 COVERED BOND, THE
FIRST ITALIAN FINANCIAL BOND SALE
SINCE MID-APRIL AFTER THE COUNTRY’S
GENERAL ELECTION EARLIER THIS YEAR
TRIGGERED A PERIOD OF POLITICAL AND
MARKET INSTABILITY. MEDIOBANCA
FOLLOWED SUIT A DAY LATER14 points
THE AMOUNT THAT THE PRICE OF WIND
TRE’S €1.75bn 3.125% SENIOR SECURED
2025s RALLIED ON TUESDAY AFTER VEON
ANNOUNCED THAT IT IS SELLING ITS 50%
STAKE IN THE COMPANY TO PARTNER CK
HUTCHISON¥119.5bn
THE SIZE OF A FIVE-TRANCHE DEAL
FROM BPCE IN THE SAMURAI MARKET
COMPRISING SENIOR AND SENIOR NON-
PREFERRED TRANCHES AS WELL AS
SOCIAL TRANCHES€1.794bn
THE AMOUNT THE ECB BOUGHT
THROUGH ITS CSPP IN TRADES SETTLED
IN THE WEEK UP TO JUNE 29
In total, it has bought €162.321bn1.52.02.53.0%3/1/173/3/173/5/173/7/173/9/173/11/173/1/183/3/183/5/183/7/187981838587899193951/5/188/5/1815/5/1822/5/1829/5/1812/6/1819/6/1826/6/183/7/18“Big move over the last weeks
in euros/dollars and therefore
a dollar five-year is too
expensive”“Issuing in dollars is not
optimal. Investors like euros,
too. Kexim was able to make a
12bp revision”