Dutch development bank FMO took advantage of the recovery in the SSA sector to execute its first euro transaction in three years, a €500m seven-year Reg S sustainability bond that drew substantial investor demand.
Bank of America, Credit Agricole and HSBC were bookrunners.
The Dutch agency sold an inaugural US$500m five-year green bond in February 2019.
A banker away from the deal said that with the new trade, FMO was targeting a tenor which has not been tapped much as five-year maturities that have been typically more aligned to bank treasury demand.
The issuer set the spread at swaps plus 31bp, which was 3bp inside the initial marketing area.
The banker away gauged the NIP at 10bp. In comparison, Thursday saw the Basque Government pay a 12bp NIP for a 10-year sustainability note.
Closer to home, Dutch local government financing agency BNG on Thursday paid a decent concession to get its deal away. BNG priced a €1.5bn five-year at 25bp over swaps, in line with guidance.
"Obviously issuers are paying larger concessions than they've been used to but they are being pragmatic. That’s understandable given the market backdrop and dysfunction in secondary," said the banker away.
The final book closed above €2.1bn.
The banker away said that the transaction had achieved a good outcome for FMO, with SSA activity picking up during the week off the back of improving market sentiment.
"I think the turning point for me was Thursday with the PEPP [Pandemic Emergency Purchase Programme] buying," he said. "That's really had an impact on secondary and we are seeing some degree of stabilisation."
The ECB now has €20bn of monthly quantitative easing, a €120bn QE envelope and €750bn of PEPP providing some €1.11tn of firepower for this year on top of its APP redemptions.
Proceeds from FMO's seven-year trade have been earmarked for green and social projects that reduce inequality.
Looking at the SSA pipeline, more socially responsible debt issuance is on the cards. Canada's CPPIB held an investor call on Friday via Barclays, Bank of America, Citigroup and JP Morgan ahead of an expected green euro fixed-rate Reg S benchmark with a intermediate maturity.