The Republic of Finland had to lean on orders from lead managers to get a €3bn 0.875% 10-year bond away, which lead to some criticising the timing and others concluding that the market is not quite there for longer-dated euro trades.
The Aaa/AA+/AAA rated sovereign rarely struggles to get deals done. Its last three euro benchmarks generated order books of €6bn, €8.8bn and €4.9bn, respectively, the latter for an unusual 16-year tenor.
Despite going for a more traditional benchmark tenor this time, it only managed to record €3.65bn of orders, including €750m of joint lead manager interest.
“I have to say that’s not really convincing at all, especially when we were all expecting a flight-to-quality bid,” said one SSA banker away from the deal.
A lead banker conceded that this assessment was accurate for longer-dated euro bonds.
“They are correct for the longer end; 10 years and longer. But I think the combination of higher yields and higher volatility means there should be opportunities for other Triple A rated issuers such as EIB and KfW in shorter maturities, were they to look at them,” he said.
This proved to be the case, with KfW generating strong demand for a five-year bond, on Thursday.
Despite this, Finland and its lead managers came in for some criticism for launching the deal so soon after a major stock market crash in China on Monday, an event that sent shockwaves through global equity markets.
“I was a bit surprised by the timing: Monday was one of the worst days in the stock market since 2008, I would have waited for at least another day of stability before going ahead with this deal,” said a second SSA syndicate official away from the transaction.
Leads defended the timing, saying that volatility is a reality in the current market and that advantage of a window has to be taken when they arise.
“What happens if there was no stability? You can keep waiting and waiting for something that never arrives,” said a second lead banker.
“If the issuer is willing to go at the spread that we are suggesting, you have got to take advantage of the window available, especially as there are not a huge amount of windows available in the next few weeks, with all the macro events,” he said.
This view was given support by the issuer.
“We did discuss thoroughly whether to launch the deal on Tuesday or wait for a bit more stability. But the question at that point was: how would it be going forward? There was no clarity on whether the markets would get any easier,” said Anu Sammallahti, deputy director of the finance division of the Finnish state treasury.
“I wouldn’t deem (the demand) as excessive, but at the end of the day, we got a fully subscribed €3bn deal at a very good level, a new-issue premium of about 4bp–6bp,” she said.
Early bird
Finland started marketing the new September 2025 note on Tuesday morning to get in ahead of an anticipated pipeline of euro SSA deals.
Having set a maximum size of €3bn, it announced IPTs of high single digits through mid-swaps. It opened books mid-morning at the 8bp area through and then set final terms in line with that at less 8bp.
Rival bankers’ estimates on the new-issue concession at this level varied from 4bp to 6bp, based on Finland’s outstanding 10-year benchmark.
The lead banker, however, pointed out that that was an old note, trading at a high cash price of around 129, according to Tradeweb.
“Netherlands is a better proxy than the pure Finland curve itself, where the 10-year part of the curve has been squeezed for a while,” he said.
Eikon prices had the Netherlands 0.25% July 2025 bond at a mid-swaps spread of minus 12bp on Tuesday’s open, suggesting that Finland offered a 4bp pick-up.
In terms of distribution, the UK took 38%, Austria/Germany/Switzerland 17%, the Americas 13%, the Nordics ex Finland 10%, Finland 10%, Benelux 7%, France 3% and others 2%. By investor type, bank treasuries took 30%, banks 25%, asset and fund managers 23%, insurance and pension funds 16% and central banks and official institutions 6%.
BNP Paribas, Danske Bank, JP Morgan, Nomura and RBS were the lead managers.
