SSA SNAPSHOT: EU mandates but dollars remains the 'sweet spot'

The pace of issuance is expected to ease slightly this week according to our latest issuance estimates poll. That said, the average guess heading into last week was EUR40.5bn and we ended up at EUR55.75bn (more if you include EM sovs). Average estimates for this week settled at EUR38.5bn but with a low of EUR20bn and also with one estimate as high as EUR65bn in the mix. It would be fairly intuitive to think that last week's barrage of deals would leave little scope for a push towards the higher estimate (EUR65bn) but we can envisage a scenario where that may well be possible (larger issuers Spain, Austria, France, Germany, EFSF and ESM are all yet to move for example) even if it isn't our base case (CADES would have been in that list but have mandated for a new transaction in USD just this morning). Furthermore, the EU is due tomorrow which will bolster volumes. However, that said, we appear to be in a position where the EU is no longer the issuer to be watched in terms of 'jumbo' deals, with the EUR15bn-20bn transactions of the past becoming a distant memory as it concentrates more heavily on auctions and taps to improve liquidity of existing bonds (tomorrow's transaction is to be a new long 3yr benchmark and a tap of the 3.375% Oct-2054).

Looking back at last year's issuance in weeks 2 and 3 doesn't really help the argument either way - EUR72.35bn was priced followed by EUR26.35bn (excluding EM Sovs) - for those who were predicting a larger slowdown from last week the take-away is fairly clear but those believing that volumes would be more robust could use the overall sum to back up their assertions. In any case, the week is likely to be lively and throw up plenty of talking points even if the pace on Monday is a little more lethargic than we would have anticipated. Going back to the EU, in previous years issuers may have front-loaded plans this week in order to get ahead of it [the EU] but that doesn't appear to be a concern for most issuers anymore. On that note and keeping it firmly in mind we expect a surge in mandates to start hitting screens from late this morning but at the same time still expect that Wednesday could be the largest issuance day of the week if certain larger sovereign issuers (Spain and Austria) make a move.

Today's euro action is so far limited to just two lines from two issuers and with neither expected to shock markets with particularly large deals. Agence Francaise de Developpement (AFD) emerges from the pipeline for a new 10yr sustainability benchmark with IPTs of OAT+24a whilst German regional player Saarland is bringing a new EUR500m 10yr at a spread (final) of m/s+42. Both issuers appear to have attracted significant attention with an order book of EUR4.9bn currently recorded against the AFD enabling a 3bp spread compression to land at OAT+21. Looking back at previous issuance we would anticipate a EUR2bn deal size and therefore a 2.45x coverage ratio whilst Saarland moved very quickly to set its spread 1bp inside IPTs after demand bolted in quick fashion to EUR1.9bn (or a 3.8x cover).

There are also two issuers looking at the sterling market with NWB Bank touting a new 3yr benchmark at SONIA m/s+43 and the Province of Quebec looking to bring a new 5yr with an IPT some 15bp back of that level.

Once again though it is the dollar market which appears the place to be seen, with some of the names we may have expected to see in the euro market in the first 3-4 weeks of the year preferring to start the year with a USD transaction. Of those BNG Bank N.V. and CADES are both targeting the 5yr tenor although they will be tomorrow's business along with a USD3bn 5yr from KfW (which already priced a EUR9bn dual tranche last week). Another name that has mandated very early in the session for a USD deal to be tomorrow's business is International Finance Corporation (IFC). In the past dollar mandates would have appeared in the early to mid-afternoon London time but so far this year the announcement times feel like they are getting earlier by the deal.

Standing out from the crowd is the transaction from the Africa Finance Corp. It isn't the most prolific issuer having placed just USD3.6bn from 6 deals since 2016 but its latest deal will certainly have plenty of eyes on it since it is just the second hybrid transaction ever in the SSA space. The first came almost a year ago from the African Development Bank (AfDB) in the shape of a PNC10.5 structure which priced at 5.75% (from 6.375% Yield IPTs).

Live deals

New Mandates

** The EU (EUROPEAN UNION), rated AAA (Fitch) / Aaa (Moody's) / AA+ (S&P) / AAA (Scope) has mandated Barclays, BNP Paribas, J.P. Morgan, LBBW and NatWest Markets as Joint Lead Managers for its upcoming EUR Fixed Rate RegS Bearer dual tranche transaction comprising a new long 3-year benchmark line due 4th July 2028 and an increase of EU 3.375% benchmark due 5th October 2054 (EU000A3K4EY2).

** The Hellenic Republic, rated Ba1 / BBB- / BBB- / BBB (low) (Moody's pos. / S&P pos. / Fitch stb. / DBRS pos.), has mandated BofA Securities, Deutsche Bank, Goldman Sachs Bank Europe SE, Morgan Stanley, National Bank of Greece and Societe Generale as Joint Lead Managers for a new Reg S Cat 1/144A 10-year EUR Benchmark CAC bond maturing 15 June 2035 to be issued in dematerialised registered form. The syndicated transaction will be launched in the near future, subject to market conditions. ICMA stabilisation rules and regulations apply.

** CADES (Caisse d'Amortissement de la Dette Sociale), rated Aa3(stable)/AA(high)(stable)/AA-(stable)/AA-(neg.)/AA-(stable) (Moody's/DBRS/S&P/Fitch/Scope) has mandated Barclays, Credit Agricole CIB, J.P. Morgan and Société Générale as joint-lead managers for a USD2bn denominated 5-year RegS/144A 3(c)(7) bond benchmark. The transaction will be launched in the near future, subject to market conditions. FCA/ICMA Stabilisation. Target Market (MiFID II/UK MiFIR product governance) is eligible counterparties and professional clients (all distribution channels).

** The International Finance Corporation (IFC), a member of the World Bank Group, rated Aaa (Moody's, stable) / AAA (S&P, stable), has mandated Barclays, Goldman Sachs International, Nomura and SEB to lead manage its new 3-year USD denominated Global SEC-exempt Social benchmark due 21 January 2028, to be launched and priced in the near future, subject to market conditions. Pay date 21 January. IPT: SOFR MS (S/A,30/360) +33bps area (currently equivalent to CT3+11.3bps area)

** KfW, guaranteed by the Federal Republic of Germany, has mandated Barclays, HSBC, J.P. Morgan and Morgan Stanley as Bookrunners for a US$ 3bn No Grow SEC Registered Global due 18-Mar-2030, rated Aaa/AAA/AAA (all stable, Moody's/S&P/Scope). Pay date 22 Jan. IPTs: MS S/A 30/360 +43 bps area (currently equates to ~CT5+11.5bps) / Taking IOIs, expect tomorrow's business

** BNG Bank N.V., rated Aaa/AAA/AAA (all stable) has mandated BofA Securities, J.P. Morgan, Nomura and TD securities to lead manage a new 5-year USD (1 February 2030 maturity) Social Benchmark fixed rate RegS/144a benchmark transaction. Pay date 1 Feb. ISINs : XS2978924442 / US05591F2Y50. IPTs: SOFR MS 30/360 SA +50bps area (currently equiv to CT5+19.1) / Taking IOIs / Tomorrow's Business

Priced last week:

• The SSA market was on fire last week with EUR55.75bn (excl EM sovs), GBP7.75bn and USD47.715bn crossing the tapes in the major issuance currencies.
• Italy and Belgium hogged the limelight in euros with the former attempting to satisfy EUR269bn of demand with just EUR18bn of new paper (dual-tranche including 10yr and 20yr green) and the latter chalking up an order book that was just shy of EUR90bn for its new EUR7bn 10yr line.
• Plenty of supranational action has been seen in all three currencies with demand looking as robust as ever and with the notable observation that sustainability lines are gaining traction in the dollar market (excluding EM sovereign Saudi Arabia total issuance there was USD35.715bn of which USD15.6bn came with a sustainability label).
• For the full report in the original PDF format click here: SSA Weekly - 10th January 2025

*EM deals are included for comparative purposes but will be excluded from EUR and USD SSA totals going forward

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.