​EDC goes one better than IFC

4 min read
Abhinav Ramnarayan

Export Development Canada was looking to ride in the slipstream of last week’s IFC five-year Global, but has managed to go one better with even tighter pricing.

EDC and IFC tend to trade more or less in line with other: both, for example, have July 2018 notes trading at swaps plus 1.1bp.

However, EDC is set to price well inside the swaps plus 2bp level where IFC sold its US$2.25bn July 2020 deal last week.

The Aaa/AAA rated Canadian agency on Tuesday set guidance at swaps plus 2bp area on its US$1bn no-grow July 2020 Global, in line with Monday’s IPTs, but was able to revise this to 1bp area and then set the spread flat to swaps on a book of over US$1.9bn.

“It helps that we are going out with a smaller size, but also you often see this – one issuer prices a successful deal and then a week later a peer prices at even tighter levels,” said a lead banker.

“The market was strong last week and it continues to be strong this week – it’s a good time for EDC to come back,” he said.

It also helps that IFC has moved tighter overnight in what was a strong session. Tradeweb had the Washington supra’s July 2020s trading at swaps plus 1.7bp when EDC started marketing on Monday evening. But by 10:30am on Tuesday they had tightened to plus 0.25bp.

The note also appears to be coming well inside EDC’s curve. A 1.625% December 2019 note priced in November last year was trading at swaps plus 3.65bp pre-announcement and 2.75bp at 10:40am.

It is EDC’s second US dollar trade this year. In May it completed a US$1bn 1% three-year at 10bp below mid-swaps.

Pricing is expected later today via Barclays, Deutsche Bank and TD Securities.

EIB on track despite slim premium

The European Investment Bank looked on track to price a new seven-year US dollar Global benchmark note despite concerns away from the deal over the tenor and lack of new issue concession.

The Triple A rated supra had generated an order book of over US$4bn by mid-morning on Tuesday for a new August 2022 note, having set a spread of 16bp over mid-swaps for the deal earlier in the week.

At this level, rival bankers suggested the new issue concession was 3bp, while Tradeweb levels suggest 1bp.

“Normally I would say, given the tenor, they would need to offer a bit more of a premium to get a seven-year away. But I think what’s happening is it looks cheap compared to historic levels,” said one syndicate banker away from the deal.

The EIB’s 2.125% October 2021s, for example, were trading at an I-spread of 5bp towards the end of May, according to Tradeweb.

Volatility in US Treasuries and uncertainty around the eurozone pushed spreads much wider, and on July 8 the note hit a high of 18.68bp on I-spread. At midday on Tuesday, it was trading at 14.8bp.

The bonds also represent an opportunity for bank treasuries to buy high-grade paper to meet regulatory requirements at a chunky spread over Libor.

“In the past few months, there were relatively few names offering high double digits – perhaps the likes of Ned Waters [Nederlandse Waterschapsbank] to name one,” said a second observer.

The deal is expected to price later today via Barclays, Deutsche Bank and TD Securities.