Dollar SSA market revived
The dollar SSA market has surged back to life as issuers take advantage of a clear window following holidays in Asia and a series of central bank meetings.
While the unfolding negotiations to raise the US debt ceiling do not set an ideal backdrop for issuance, this week’s window has been lined up for some time given recent central bank meetings had kept the dollar and euro markets relatively subdued.
“I think we’re going to see decent pipeline across dollars and euros," a banker said, adding that the front-end of the US dollar curve has come under pressure due to the headlines.
At the same time, fretting over the debt ceiling has become a regular occurrence, a second banker said: “It’s not like we haven’t been here before.”
“The market has been undersupplied,” he said. “Not for reasons of market conditions. It’s simply been the spate of holidays in Asia. I’m aware of quite a few issuers who are looking.”
BNG showed late last week that debt ceiling headlines are not precluding good trades. It got a massive US$4bn book for a US$1.5bn five-year social bond. That final interest was despite the print offering only 1bp of new issue concession at the landing spread of 45bp above SOFR mid-swaps, according to a lead on the deal.
That deal from the Dutch agency was the first dollar SSA print since late April, IFR numbers show.
Price is motivating investors, the first banker said: “Broadly, people are looking for spread, and they should get it.”
The price is looking right for euro funders, too. The second banker said that the basis from dollars to euros has improved for many SSAs, making dollars the cheaper market.
When it comes to tenors, he is expecting SSAs to move along the curve from the most defensive two and three-year maturities.
“Five years is looking like the sweet spot,” the second banker said. “For about 18 months now we’ve had a challenging market for all but the supras in five years… The market is [now] feeling in better shape. We have a lot more clarity over the direction of rates.”
A flattening curve is also incentivising five-year deals, he said.
Caisse d'Amortissement de la Dette Sociale has seized that five-year opportunity. The French agency is marketing a five-year social benchmark at IPTs of 47bp area above SOFR mid-swaps. BNP Paribas, Goldman Sachs, NatWest Markets and Societe Generale are lead managers.
The Council of Europe Development Bank opted for a shorter deal, mandating a three-year dollar social inclusion bond. Credit Agricole, Morgan Stanley, NatWest Markets and Nomura are marketing the print at IPTs of 24bp area above SOFR mid-swaps.
Japanese SSAs are also making their way to market.
Japan International Cooperation Agency took its time laying the groundwork for its new deal: it put the mandate for investor calls out a month ago. It tapped Daiwa, Barclays, Citigroup, and Morgan Stanley for the work. It is now marketing a five-year dollar sustainability benchmark at 80bp area above SOFR mid-swaps.
The same day as JICA’s IPTs announcement, Tokyo Metropolitan Government mandated Goldman Sachs, Barclays, Morgan Stanley and Citi to start investor calls on Tuesday. The name is targeting a three to five-year dollar print.