SSA SNAPSHOT: Slovak Republic offer familiar starting concession

With yesterday’s issuance bringing just EUR2bn in new supply today’s trio of euro-denominated deals will need to drive considerable momentum if the weekly estimate of EUR11bn is to be met. On that front we have the Basque Region with a new 10yr sustainability deal, a new Joint Laender transaction capped at EUR1bn from the outset and an as yet un-sized new 15yr from the Slovak Republic.

Assuming EUR700m for the Basque Region 10yr (in line with the issuer's largest ever deal) and taking the EUR1bn Joint Laender 5yr as given that would shuffle the weekly tally to just EUR5.7bn and leave it seemingly unlikely that the Slovak Republic could propel us towards our EUR11bn 'line in the sand'. Indeed, the Slovak sovereign has been active some 12 times since 2017 (bringing a total of 15 lines for EUR23.5bn) but over that period has an average deal size of EUR1.567bn. Even the largest deal the issuer has ever placed - a EUR3bn 10yr in Feb 2024- would only extend the euro issuance ledger to EUR8.7bn and still a way short of our panel of experts' average estimate.

Sticking with the Slovak Republic we are not anticipating a repeat of last February's EUR3bn instead envisaging the placement of a new EUR2bn 15yr. Looking back over the issuer's history makes for pretty interesting reading with post-2023 pricing dynamics following a pattern of 25-30bp starting NICs followed by 15-20bp of spread tightening to land with a 10-15bp NIC. The four most recent deals (5 lines including a dual tranche in Feb 2023) saw all but one finish with a 10bp NIC with the aforementioned dual tranche providing additional interest as a EUR2bn 12yr deal saw 15bp of tightening and a 10bp NIC whilst the 20yr line saw the reverse i.e. 10bp of tightening and a 15bp NIC. Today's IPTs for the new 15yr have been communicated at m/s+140a and appear to be offering a starting NIC of (you guessed it) 30bp.

In dollars, the Governor and Company of the Bank of England are looking to become the first non-EM SSA play since the 6th Feb - a now 13 day hiatus - with its annual outing for a new 3yr line. The Bank's history of comparative transactions stretches all the way back to Mar 2007 with an annual USD2bn deal every year since that date. Our best guess would be a repeat of the same with pricing already tightened from T+12a to T+11 after IoIs were recorded at USD2.8bn. For context, last year's deal garnered interest of USD5.3bn and the 2023 instalment an order book of USD7.5bn.

All this on the back of another subdued session on Tuesday which saw a EUR1.5bn 10-year from BNG Bank (priced at m/s+51, inside IPTs) and a EUR500m 9-year from Lower Saxony. Demand for the latter was muted, with final books at EUR760m, pricing in line with IPTs and fair value.

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