14th May 2025

The European bond market is seeing plenty more primary market activity Wednesday with a bulging pipeline and a healthy helping of that coming from SSA issuers and once again from a broad range of issuers. Belgium and Latvia are tapping the market in the EUR sovereign space with their respective Oct 2030 OLO and 5yr RegS only offerings. On the supranational front, European Investment Bank (EIB) is bringing a EUR4bn no-grow 3yr EARN transaction, while Asian Infrastructure Investment Bank (AIIB) is exploring the USD market with a USD1bn no-grow 10yr Sustainability Development Bond, with IPTs around SOFR m/s+ 65 bp.

Agency activity is also notable with BNG Bank marketing a 5yr EUR benchmark, while Eurofima is also in the market looking to further advance its environmental initiatives through a 15yr green bond (also in EUR). The day's lineup therefore includes offerings ranging from 3 to 15 years, and with a particular continued focus on the EUR market. Indeed, so far this week we have seen EUR17.25bn of euro denominated issuance (short of the EUR21.5bn average estimate) and not a single deal in the dollar market so far.

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We wrote in the lookahead section of last week's SSA Weekly that we would need to see issuance from every corner of the globe, and so far, the market is supplying (and then some) on that front. We espoused the need for some larger issuers if we were to get to the weekly average estimate and not only did we get KfW (with a new green bond - see below) yesterday we are being treated to a similarly short duration trade today from the European Investment Bank (long 3yr EARN). As the European Union did yesterday the issuer has decided to announce a deal size up front (EUR4bn in this case) but has also added the 'WNG' designation which should help firm up demand especially after the EU saw EUR4bn evaporate from the order book when it increased its deal size from EUR6 to 7bn. The EIB was last in the market on the 2nd April when it opted for a rather unusual (for the issuer) tenor of 12 years. The EUR3bn deal was inundated with orders and the deal was covered 13.33x over at the final count. It doesn't appear that we will replicate that response this time around with the order tally currently sitting at EUR23bn (a 5.75x cover) with final spread set at m/s+10.

Eurofima hasn't issued a new transaction longer than 10 years since April 2021 and so today's 15yr green should be an opportunity for investors to get additional exposure to the name and add duration. Following a few minor stumbles over the past couple of years (it had to postpone a small EUR160m tap of an Apr 2041 line back in Mar 2022 for example) the issuer was back on top form with its most recent outing - a EUR500m long 10yr green priced in Nov 2024 - securing a EUR1.5bn order book and slashing 5bp from its m/s+67a IPT. Whilst spread compression this time around has been finalised at just 3bp (to land at m/s+74) it is to the order book that attention will be guided as it swelled early on and finalised above EUR3.2bn (incl JLM interest). That isn't just a new record for the issuer, it is actually more than double the previous record and represents a huge performance from the entire Eurofima team and its banks.

The Kingdom of Belgium is picking up where it left off it seems and following up a new EUR5bn 17yr OLO that attracted EUR37bn of orders with an as it stands unsized and much shorter Oct 2030 line with demand currently indicated at EUR42bn. The issuer has only really issued another 5yr deal on one occasion in recent years with that coming in Apr 2024 - it was a EUR7bn deal (6.57x covered) and priced 2 bp inside IPTs at m/s-1bp. Sticking with sovereign issuers (but one that arguably falls in the EM category for some people) and Latvia is also bringing a new 5yr deal. It was last active in Sept 2024 when it raised ER600m via a long 7yr deal. On that occasion we saw 20bp carved from IPTs, something that is unlikely for today's deal since starting NICs appear to be in the region of 15bp with a fair value of m/s+65a. Lithuania priced a 5yr earlier in the year at m/s+60bp (0bp NIC, 2.05x cover) and that bond was seen on screens in the area of i+56bp this morning.

The dollar deal from AIIB appears to be benefitting from a lack of recent new paper (there have been no SSA deals at all in USD since 30th April in fact!!) with the USD1bn deal size being met with orders that were last seen in excess of USD6.25bn. That is still a little short of the demand seen for its 5yr in January of this year but the USD8.3bn was covering a USD2bn deal size on that occasion - so today's cover ratio should comfortably become the issuer's largest to date in the dollar market (according to available data).

Previous session recap

Tuesday's new issuance showcased an equally impressive range of issuers and also with several notable ESG-focused deals to boot. The European Union dominated the day's activity from a volume perspective with a EUR7bn 20yr offering (up from a pre-announced EUR6bn). It attracted significant investor interest with a book size of EUR60bn. The deal priced at m/s +110bp which appeared to be around 1bp above fair value. KfW brought a new 5yr green bond, raising EUR4bn and taking YTD green issuance to around EUR9bn equivalent (it has a EUR10bn target). The deal saw strong demand with books reaching EUR22.5bn, pricing at m/s+21 and with a 1bp NIC.

CADES issued a EUR2.5bn social bond maturing in Sep 2028, drawing EUR10bn in orders and pricing at OAT+10. That takes the issuer to around 75% funded for the year and leaves scope for another USD transaction later in the year (likely another USD2.5bn as has become its theme so far in 2025). Queensland Treasury Corp. entered the EUR market with a EUR1.25bn 10yr deal and blew the doors off with a EUR9.3bn order book, while pricing at m/s +74 and mid-high single digits above Canadian regional issuers of the same tenor and a recent(ish) 10yr deal from Auckland Council. Junta de Andalucia issued a EUR500m long 8yr sustainability bond and with a EUR1.8bn order book pushed pricing to SPGB+16 (from +21a IPTs), which was arguably just inside fair value. In sterling, CAF tapped for GBP250m a bond maturing in Jan 2030 and NWB Bank launched a new Oct 2027 line at SONIA m/s+43 (in line with IPTs).

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