SSA SNAPSHOT: EUR deals absent as issuers look elsewhere

There may be no euro-denominated deals live in the SSA market at the start of the first full week of 2025 but what we are lacking on that front is being made up for by deals in other currencies and in the release of new mandates. With the Epiphany holiday taking hold in some parts of Europe there was little expected to hit screens today in the single currency but that obviously left the GBP and USD markets wide open for new deals. Taking advantage in the former we have two high profile names in the shape of KfW (new 3yr benchmark) and the Asian Development Bank (ADB) (new 5yr benchmark) with both moving quickly to finalise spreads in the face of demand levels that finished well above average inaugural issuance volumes from the respective names over recent years (i.e. first deals in the month of January). For KfW, the average size of a new GBP transaction at this time of the year (since 2020) is GBP1.3bn whilst conducting a similar analysis for ADB shows an average size of GBP900m. That compares to early order book updates of GBP1bn (subsequently revised up to GBP1.9bn) and GBP875m (later increased to GBP1.5bn) respectively suggesting robust cover ratios relatively speaking (for GBP deals) on both transactions.

Today's sterling deals come on the back of a handful of GBP transactions that surfaced during last week's shortened period. The Council of Europe Development Bank (CoE) and Inter-American Development Bank (IADB) set the tone early with their respective GBP300m 3yr social inclusion bond (SONIA m/s+32) and GBP450m tap of October 2029 maturities. Both deals priced in line with IPTs whilst on Friday, Asian Infrastructure Investment Bank (AIIB) brought a GBP500m long 4yr sustainability bond that was priced at SONIA m/s +43bps and tightened 2bps from IPTs. Rentenbank rounded out the GBP offerings with an opportunistic GBP500m 5yr deal that was well-received, achieving a 2.5x coverage ratio despite offering zero NIC (at SONIA m/s+44).

Notably, new issue concessions on last week's GBP offerings were all recorded at zero, barring the IADB tap at 1bp, continuing a trend that persists in the sterling market whereby IPTs are generally very tight to 'fair value' and we seldom see any meaningful spread compression. Today's KfW is an exception in that sense having seen 1bp of spread 'finessing' and at a time when the order book was only communicated at GBP1bn (following the spread finalisation the order book almost doubled). The proposed ADB 5yr at SONIA m/s+43 therefore comes in line with AIIB's recent long 4yr sustainability line and a basis point inside where Rentenbank printed at the 5yr tenor just 3 days ago.

On the USD side there is an early outing for the Development Bank of Japan (DBJ) which is not usually seen in the new issue market until the last week of January at the earliest - with first quarter inaugural issue dates of 21st Jan 2021, 8th Feb 2022, 23rd Jan 2024 in recent years. The issuer had been seen to be increasing engagement with investors throughout the latter stages of 2023 and in 2024 with investor updates preceding many of its visits to the market. That certainly appeared to help general sentiment surrounding the name and it recorded some pretty eye-catching demand figures over the course of that period, not least a 10.6x cover ratio on its USD500m 10yr USD deal that priced on 23rd January 2024 and a 12.8x cover for a EUR500m 4yr sustainability line in Sept 2023. That all said, the issuer would no doubt settle for cover ratio level in line with its 2020-2025 average of 3.38x especially since today's deal has seen IPTs released at SOFR m/s+78a which appears to be just 1bp wider than where the Jan 2034 (the same bond we already mentioned above) is currently seen on screens. Utilising IGM data, the issuer appears to have offered up a decent starting NIC of 4-5 at various points in recent years but with that working well to attract significant excess orders (and presumably some from new investors) it appears that DBJ now finds itself in a position where it can push a little harder on the pricing front. We'll be keen to see how this plays out especially in the context of Japanese issuers in general seeing spreads compress with agencies from other jurisdictions especially throughout 2023. Although books are open on this pricing is not expected until Tuesday which is peculiarity only really seen on an ongoing basis from the Japanese agencies.

Live Deals

New mandates

** The Kingdom of Belgium (rated Aa3/AA/AA-; outlook negative/stable/negative) intends to issue a new EURO syndicated benchmark bond maturing 22 June 2035 (OLO 103) in the near future, subject to market conditions. The Kingdom has mandated BNP Paribas Fortis, Crédit Agricole CIB, HSBC, J.P. Morgan and Morgan Stanley as joint bookrunners. All other Primary Dealers of the Kingdom of Belgium will be invited to the syndicate group.

** KfW, rated Aaa/AAA/AAA (Moody's/Scope/S&P, all stable) and guaranteed by the Federal Republic of Germany, has mandated BNP Paribas, BofA Securities, Deutsche Bank, and Goldman Sachs Bank Europe SE to lead manage a new Euro RegS Bearer long 3yr benchmark issue no I/2025 maturing on 11 April 2028 and 10 year EUR3bn no-grow benchmark issue no II/2025 maturing on 17 January 2035.

** The World Bank (International Bank for Reconstruction & Development – IBRD), rated Aaa / AAA (both stable), has mandated BNP Paribas, J.P. Morgan, Scotiabank and Wells Fargo Securities as Lead Managers for a new 7yr USD fixed rate benchmark Sustainable Development Bond (SEC exempt). World Bank bonds support the financing of a combination of green and social, i.e. sustainable development, projects, programs, and activities in IBRD member countries.

** The Export-Import Bank of Korea ("KEXIM"), rated Aa2 (Stable) by Moody’s, AA (Stable) by S&P and AA- (Stable) by Fitch, has mandated ANZ*, Citigroup, Deutsche Bank, Goldman Sachs International, HSBC, J.P. Morgan and Wells Fargo Securities as the Joint Bookrunners and Lead Managers to arrange Global Investor Calls, commencing on January 6, 2025. A USD-denominated SEC-registered senior unsecured notes offerings with expected tenors of 3yr FXD (Sustainability Notes) and/or FRN, 5yr FXD and 10yr FXD may follow, subject to market conditions. Deal Roadshow. Timing as early as 7th Jan.

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