BNG shakes up market with euro benchmark

2 min read
Abhinav Ramnarayan

While suggestions were that the SSA primary market could wake up this week, Bank Nederlandse Gemeenten’s announcement of a new euro benchmark trade still managed to cause something of a stir on Wednesday morning.

The Dutch agency, rated Aaa/AA+/AA+, opened books a new seven-year at mid-swaps less 5bp area, with the deal expected to price later today.

Notably, this marks the first euro benchmark trade from a European agency since KfW priced a €2bn seven-year deal at the start of July.

SSA issuers have struggled to get euro benchmark trades away ever since the ECB’s quantitative easing programme pushed core European spreads to levels that were too tight for many investors.

That KfW seven-year, for example, struggled to gain traction despite offering a new issue premium of 7bp–8bp, and fell well short of the German issuer’s usual benchmark size of €3bn.

However, in recent weeks bankers believe that prices have stabilised around levels that are palatable for investors, and the new issue concession required is not so high that it would keep borrowers out of the market.

BNG will offer the first test of whether this holds true, particularly as it is not offering a massive concession.

“It looks like they are offering a new issue premium of around 5bp, and about 20bp over the Netherlands, which may help. But they are definitely not giving it away,” said a rival banker.

Tradeweb levels corroborate this, showing an outstanding BNG January 2022 at an I-spread of minus 10bp on Wednesday’s open, while a lead banker agreed it was reasonable assessment.

Eikon prices show the outstanding Netherlands July 2022 bonds at a swaps spread of minus 27bp, suggesting a 22bp pick-up on the new BNG note.

Pricing is expected later today via Barclays, BNP Paribas, Goldman Sachs and Rabobank.

BNG last week sold a  €1bn 3% October 2021 deal