Asian Development Bank has managed to drum up healthy demand for a five-year US dollar benchmark trade by offering a bit more of a concession than observers expected.
The Triple A rated supranational on Wednesday opened books on an August 2020 note at 4bp area over mid-swaps, the same level as Tuesday’s IPTs. By mid-morning, it had recorded an order book in excess of US$2bn and left guidance unchanged.
“I am very surprised they didn’t just start marketing at 3bp over mid-swaps – my guess is that’s where they will end up. But who knows, maybe this is the right approach in this market, with all the uncertainties, but for me it is surprising,” said one rival banker.
His assessment is based on IFC’s recent US$2.25bn 1.625% five-year trade, which priced at 2bp over mid-swaps in July and was trading at an I-spread of plus 1.685bp at midday on Wednesday, according to Tradeweb.
ADB’s outstanding curve also paints a similar picture in terms of the new issue concession: Eikon prices showed an outstanding 1.375% March 2020 at a swaps spread of 2.1bp at midday on Wednesday.
A lead banker saw that note at 1bp–2bp over mid-swaps, and said a concession needed to be offered.
“This is quite a different market to the one in which IFC priced its deal, the big difference being China’s devaluation of its currency and the uncertainty it has added,” he said. “I think in that sense it’s a fair level and it’s pragmatic in the sense that ADB want to get a good trade away in terms of size and (aftermarket) performance.”
Pricing is expected later today via Bank of America Merrill Lynch, Goldman Sachs, JP Morgan and RBC.
