The SSA euro market remains in rude health, with a 15-year green bond from the European Investment Bank heavily oversubscribed and the Federal State of Brandenburg launching eight-year paper in negative spread territory.
“They look pretty impressive and they’ve gone well,” said a banker away from the deals. “Both should give some comfort to the market after the last couple of days where there’s been a slight widening.”
A syndicate banker attributed the success of the deals in part to the ECB’s asset purchase programme – for which both are eligible – which is expected to buy over €1trn of bonds this year.
“Everyone is still playing the same game in trying to buy as much as they can and then afterwards sell it to the central bank,” said the syndicate banker.
The launch of the €1bn 2035 Climate Awareness Bond from EIB marks its second longest maturity for green euro debt and its first new issuance of green paper this year following a couple of highly successful taps.
An ECoop trade for the issuer (Aaa/AAA/AAA) earlier this month was eight times subscribed and its last two CAB taps in May and April were six and seven times subscribed, respectively.
The latest deal was met with another blowout response, with demand of more than €6bn for the transaction. Barclays, Citigroup, Credit Agricole and UniCredit were lead managers, tightening the spread from flat area to mid-swaps less 1bp, with a 0.01% coupon.
EIB’s November 2042 CAB was quoted at 0.5bp over mid-swaps. Proceeds of the new issue will be allocated to EIB’s lending activities that contribute to climate change mitigation in line with evolving EU sustainable finance legislation.
AGGRESSIVE PRICING
In the case of Brandenburg, the €500m June 2028 note came with demand in excess of €750m. Lead managers BayernLB, Commerzbank, LBBW, NordLB and UniCredit set the spread at mid-swaps minus 1bp, tightening from initial guidance of flat area. The coupon was fixed at 0.01%.
“We came to the market right at the curve, but thanks to the trading books and levels of support we saw, there was a possibility to tighten the spread under the curve,” said a lead, who described the pricing as aggressive.
A banker away described the decision to begin at flat area as quite punchy based on previous trades from the Triple A issuer, before adding that it looked to have gone well.
In terms of comparables, Lower Saxony (AAA, Fitch) launched a €1bn eight-year deal earlier this month at mid-swaps plus 1bp, with the note tightening slightly in the secondary market to plus 0.5bp at present, according to Tradeweb.
Brandenburg has recently been relatively quiet compared to some of its peers, with Covid-19 only having a moderate impact on funding needs. The lead said that this element gives it a rarity value. A second lead noted that German Lender have been reasonably active of late and that bankers are already looking ahead to future deals.
“We are all waiting now for KfW to do something again because we haven’t seen them for quite some time, which is quite unusual,” he said.
Source IFR