Top Tier SSAs press play in once-paused dollar market
New supply from favoured names has shown dollar SSA deals are working again – for now – after Silicon Valley Bank’s collapse scuttled sentiment, though the resumption is likely to be short-lived thanks to the Easter break and holidays in Asia.
“The dollar market is strong in terms of bottom-line [demand],” said one banker. “But clearly there’s a concentration in the three-year to five-year [part of the curve].”
The secondary market was showing signs of pent-up demand ahead of the three new issues, the banker said, after a dearth of supply in the weeks preceding the relatively hectic window.
The deals’ success show there is funding to be had in dollars, but this window has a hard stop at the end of the week with the start of the Easter break, which is likely to see many market participants away from their desks.
The three trades from KfW, World Bank and Inter-American Development Bank (IDB) brought dollars fully back to life on Tuesday after a small agency issue the week before showed buyers were ready to engage.
KfW posted solid IoIs of US$4.9bn with IPTs of 22bp area above mid-swaps for its three-year bond – an aggressive level, said the banker, who was a lead on the deal. That was compared to both recent supply and the other prints out on the day. “We were pleasantly surprised” by the demand, he said. Deutsche Bank, HSBC, and JP Morgan ran the deal.
The German name tightened its deal to plus 20bp, leaving no new issue concession, said a lead on the World Bank deal out on the same day. KfW raised US$3bn from the final US$10.75bn book.
World Bank got an US$8.2bn book by close for its July 2028 sustainable development bond, after starting at IPTs of 39bp area above SOFR mid-swaps. It took US$5bn from that bid. The leads Citigroup, RBC, TD Securities and Wells Fargo tightened it 2bp to land the paper at 37bp over.
“There was a little price discovery post-all this volatility,” said the World Bank lead. “There was a bit of a question mark over the needed new issue concession.”
Buyers did not demand much, however. The World Bank paid 0.5bp of new issue premium at landing, the lead on that deal said. The name was helped to that attractive funding level by the “sweet spot” long five-year tenor, he said, a good base for drawing bank treasury interest.
Going the longest, IDB had perhaps the most challenging trade of the three out on Tuesday, having mandated a 10-year tenor, well beyond the safety of the well-tested three-year to five-year marks. It got the smallest bid of the trio: US$3.1bn. BMO, Bank of America, Deutsche Bank and Morgan Stanley set the spread only 1bp tighter than the 54bp area above SOFR mid-swaps guidance, pricing it at plus 53bp.
The paper offered a 4bp concession at landing, according to the World Bank lead. IDB funded US$2.25bn from the bond.
Still more US dollar supply is on the way. Quebec mandated a five-year via Bank of America, CIBC, JP Morgan, RBC and TD Securities following Tuesday’s group of deals. It set IPTs at 58bp area above SOFR mid-swaps.
Cash may have built in dollars, enabling more supply, but following up on IDB’s long deal could be pushing the limited bid at that part of the curve too far, the World Bank lead said: “I foresee it being more difficult to tap the longer end now that IDB has [taken] most of the demand.”