KfW eyes euro trade, tenor uncertain

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Abhinav Ramnarayan

Germany-guaranteed KfW is considering a return to the euro market as early as this week, according to four bankers covering public sector debt, though details around potential tenor and structure remain uncertain in a volatile market.

The Triple A rated agency was initially rumoured to be considering a 10-year euro-denominated benchmark transaction this week, but an unenthusiastic response to Finland’s 10-year trade that priced on Tuesday has clouded the picture.

“There are all sorts of rumours flying about: that they will do a 10-year, a five-year or a tap of the (recently issued) seven-year, and I guess this just reflects the current market,” said one SSA syndicate official.

“The idea around what is the right tenor has shifted, especially after the Finland deal. It is no longer clear what is the right maturity,” he said.

KfW last issued a benchmark euro bond in mid-July, a €2bn 0.625% seven-year that struggled to generate demand at a time when many investors were fleeing core European credits because of exorbitantly tight spreads.

In the last few weeks, some bankers said spreads have stabilised around more palatable levels and investors are returning, though they are now concerned that Finland’s inability on Tuesday to generate a large order book for its €3bn 10-year may suggest otherwise.

KfW