SSA SNAPSHOT: More sovereign mandates expected

Predictions from our latest issuance estimates survey indicated that we are in store for another fairly robust week on the new issuance front. The average estimate of EUR30.5bn coming right in the middle of a EUR16-45bn range of guesses. That said, feedback / market chatter suggesta that we are much more likely to end up near the top of that range than the bottom. Indeed, with France already having mandated for a new 15yr OAT (May 2042 maturity -see details below) to come before its large (cEUR15bn across OAT and OATei) auction on Thursday, we are now expecting Spain to make its first move into 2025 capital markets and can see it repeating the EUR15bn 10yr opening gambit that it played in 2025. The question then becomes 'is there scope for Spain to go even larger if demand dynamics play out like they did for Italy?'.

There are also a number of other EGB issuers yet to move. Finland perhaps best fits that bill, they have a history of January issuance and unlike Germany (Apr 29 & Green Feb 33 on Tues and May 38 & May 41 on Wed) they are not scheduled to hit the auction market any time soon. Another high profile name that we are still waiting on is Austria. It too has no auction activity planned until 4th Feb although it looks increasingly likely that it is waiting for further budget clarity before making a move in the syndicated space.

Already in the pipeline was the European Financial Stability Facility (EFSF) which sent an RfP to banks in the early part of last week and subsequently formally mandated for a new long 3yr and 10yr this morning. With a EUR21.5bn funding programme for 2025 it will be looking to get the year off to a similar start to previous years. For context, it placed dual tranche transactions in every year since 2021 with 10/30yr, 8/30yr, 4/10yr and 6/15yr combinations. Notably, total deal sizes over that same period (and deals) increased incrementally from EUR5bn to EUR7bn which points to a deal size of EUR7-8bn to kick off with today. At the first update order books were communicated at EUR21.8bn and EUR32.2bn respectively with pricing being set 2bp inside IPTs on the long 3yr at m/s+19 whilst the larger interest in the 10yr appears to have bought it some additional leeway and the m/s+53a IPT was guided down to m/s+51 (+/- 1bps WPIR). In quick succession, the final price was confirmed on the longer line as m/s+50 with some minor amendments to order books (EUR24bn and EUR33bn respectively).

Elsewhere, Land Berlin is in the EUR market for a 6yr FRN and Export Development Canada (EDC) is looking to follow up a very successful euro outing last week with a new 5yr benchmark in sterling. Its EUR2.25bn 5yr saw great success on the investor demand front attracting EUR6.25bn into the order book for a final cover ratio of 2.78x, landing 2bp inside IPTs and in line with fair value. Today's GBP deal has seen the spread set at SONIA m/s+45 (in line with IPTs) and at the first update there was GBP500m in the order book which compares to previous deal sizes (since 2020) that range from GBP300-700m (its last two outings have both been in January (2023 and 2024) with 3yr and 5yr tenors and deal volumes of GBP600m apiece).

A late addition to today's roster came in the shape of a relatively small GBP250m tap of a Nov 2027 line from Land NRW. At SONIA m/s+36 (the number) it will price at the same spread as the original deal back on 4th Nov 2024 and around c.10bp back from a similar maturity bond from KfW (28th Oct 2027 maturity).

Live deals

New Mandates

** The Republic of France, rated Aa3 by Moody's (Stable) / AA- by S&P (Stable) / AA- by FITCH (Negative) and AAh by DBRS (Stable), has mandated BNP Paribas, Credit Agricole CIB, HSBC, Morgan Stanley and Societe Generale to act as Joint Lead Managers on an upcoming new long 15yr OAT benchmark, due 25 May 2042

** The German State of Saxony-Anhalt, rated Aa1/AAA/AAA (Moody’s/Fitch/Scope), has mandated Barclays, DekaBank, Deutsche Bank, NORD/LB, Rabobank and UniCredit to lead manage its upcoming EUR 1bn (no-grow) fixed rate Landesschatzanweisung with a maturity of 10 years.

** Japan Bank for International Cooperation (JBIC), guaranteed by Japan, expected rating A1/A+ has mandated Barclays, Citi, HSBC and Morgan Stanley as Joint Lead Managers to arrange a series of fixed investor conference calls today (Monday 20th January 2025). A potential GBP denominated SEC registered 5yr fixed rate benchmark offering may follow, subject to market conditions and relevant MoF approval. The notes are expected to be admitted to trading on the Euro MTF Market of the Luxembourg Stock Exchange. Denominations GBP100k and integral multiples of GBP1k in excess thereof. Manufacturer target market (UK MiFIR product governance) is eligible counterparties and professional clients only (all distribution channels). No PRIIPs or UK PRIIPs key information document (KID) has been prepared as the securities are not available to retail in the EEA or the United Kingdom.

• Netroadshow link here (Entry code: JBIC2025)

Highlights from last week

• For the full report in the original PDF format click here: SSA Weekly - 17th January 2025
• Pace of Issuance Slows:This week saw a significant slowdown in bond issuance across euro and dollar markets. Euro issuance fell to EUR32.25bn, down from last week's EUR55.75bn. Similarly, dollar issuance dropped by over USD20bn week-on-week.
• Key Issuers and Deals: Noteworthy euro deals included Greece's record-breaking EUR4bn 10yr with EUR40.5bn demand and the EU’s EUR11bn dual-tranche deal. In dollars, CAF set a demand record with a USD2bn transaction supported by a USD13.6bn order book.
• Strong Demand for Rarity and Sovereign Names: Smaller or less frequent issuers like Saarland, International Development Association attracted strong demand, leveraging rarity value.
• Market Dynamics and Trends: Issuance early in the week was limited, with issuers showing less concern about competing with EU deals. Later in the week, activity picked up post-US CPI data, with a mix of EUR and USD deals highlighting strong investor appetite across diverse tenors and regions.
• Africa Finance Corp:New USD400m PNC5.25 hybrid at 7.625%, saw order book attrition after price guidance reduced from 8%

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