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SSA SNAPSHOT: EU opts for another dual tap

The week has been kickstarted by a duo of opportunistic issuers, one Belgian and one German, with each coming to the market to increase the size of existing deals and between them contributing EUR550m to the issuance tally. As a reminder our issuance estimates survey conducted on Friday anticipated EUR10bn (on average) would surface before the week is out, with 'anchor' supply coming from the European Union (EU) and expected to be around EUR6-7bn in total.

Back briefly to today, the Region of Wallonne opted to tap, for EUR300m, its Dec 2030 maturity taking the deal to EUR1bn in size. The social bond was first issued in Jan of this year as part of a dual-tranche transaction that also included the tap of a Mar 2043 line (total deal size was EUR1.5bn). Since then, the issuer has targeted another longer dated line (a new EUR750m 30yr social line) which is very much in keeping with its willingness to place long maturities as witnessed by its weighted average term to maturity of over 16.5yrs (on over EUR13.35bn of issuance since 2019). Despite the usual longer bias there was clearly demand for additional shorter-dated paper from the issuer with the transaction seeing EUR1.3bn of demand and a healthy 4.33x coverage ratio.

That level of coverage was almost matched by the day's other tap issue which came from the Free and Hanseatic City of Hamburg. Its EUR250m increase of an Oct 2029 maturity, that was first issued less than 2 months ago (25th Sept), took the total deal size to EUR750m. Order books grew healthily throughout the morning session, peaking at EUR895m despite pricing being finessed down to m/s+30 from IPTs that were 1bp higher. At the landing spread there appeared to be a small NIC still on offer but with a more exact figure difficult to ascertain given the recent move wider in spreads (driven by the collapse of bund swap spreads - with the 10yr moving into negative territory) and the lack of recent primary activity that the SSA sector (perhaps more than others) will be looking to for reassurance that deals are being pitched at the correct spread levels.

That all feeds neatly into the EU deal expected tomorrow which will see another dual tap approach being deployed. Being one of the more frequent and large volume issuers, the EU's secondary bonds are arguably well placed (relatively speaking) in terms of liquidity and in that sense should provide the SSA market with some clear data points with which to work from in terms of the primary market helping with price discovery. The issuer has again opted to increase one shorter dated (2.5% Dec 2031) and one longer dated line (Feb 2043) with the former first launched in September (EUR5bn) and set for its first increase whilst the latter is a green bond that was first issued in Apr 2022 (EUR6bn that has grown to EUR9.027bn via auction) and has not since been targeted via syndication. Recent EU deals have often taken the form of dual-taps and or one new line accompanied by a tap but with two underlying features almost omnipresent throughout - longer dated lines and taps have more often than not seen significantly higher cover ratios. Looking at the first of those two points deals with maturities of less than 15years have an average cover ratio of 9.24x whilst for those with a greater than (or equal to) 15yr tenor the figure rises to 12.06x. Similarly, for new deals (of any maturity) the average coverage is 9.51x whilst for taps that increased markedly to 12.88x.


Looking back over last week - Even quieter than expected

  • For the full report in the original PDF format click here: SSA Weekly - 15th November 2024
  • In euros, last week was very quiet on the issuance front with just EUR1.35bn surfacing from a total of 4 transactions. Land Bremen (5yr LSA) and Eurofima (10yr green) both issued EUR500m deals and arguably fared well (in terms of cover and pricing dynamics) given that bund-swap spreads went into negative territory at the 10yr point.
  • The GBP market was visited twice, both times early in the week, with both KfW (GBP300m Dec 2026 tap) and KommuneKredit (GBP375m 3yr) achieving favourable outcomes.
  • The Republic of South Africa visited the dollar market for the first time since Apr 2022 and took out USD3.5bn across 12yr /30yr tranches.


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