The green format gave Rentenbank's 10-year extra appeal on Tuesday, with the transaction gathering over €3.3bn of demand in a market which, while better in tone, remains challenged.
The German agency launched a €1bn trade at 11bp through mid-swaps, 2bp tighter than guidance, via BNP Paribas, Bank of America, DekaBank and Societe Generale.
"If you look at their deals historically, they always tend to be quite difficult. But here, it's gone very well, and that's despite coming on the expensive side, I think," a syndicate banker said. "I'd argue that, looking at recent deals, the green aspect has been very helpful."
KfW, for example, pulled together €13.6bn in orders for a €4bn seven-year green last week, while the likes of Bpifrance and Swedish Export Credit Corporation also harnessed the power of the format to land successful transactions at the end of June. Already, two more issuers are looking to follow, albeit in a slightly different ESG format. Austria's OeKB has mandated BNP Paribas, HSBC, Raiffeisen Bank International and UniCredit for a €500m no-grow five-year sustainability bond, while BNG is planning a euro 10-year sustainable bond via Credit Agricole, DZ Bank, Rabobank and Santander.
"For a high-quality credit, €1bn of green clearly is fine," another banker said. "In the case of EIB, we saw that €1bn in a part of the curve that offers value works well. Generally, I would say that the euro market would seem to offer reasonable execution. There's a bit more uncertainty in dollars after AfDB and CDPQ. It was very volatile going into the end of the first half and quarter-end. Now that's out of the way, we just need a guinea pig to step in and test the market."
As has been the case on recent transactions, there were varying views on how to calculate relative value. Some bankers looked at Rentenbank's own curve, others at where KfW's 1.375% €3bn June 2032 green bond that priced in April was trading, and others versus where a new theoretical KfW would price.
At less 11bp, it was around 5bp–6bp back of KfW's secondary curve and more or less flat to the borrower's own curve.
"I'm not sure investors are looking at the deal that way [versus Rentenbank]," a third banker said. "It's more about the relative value versus KfW and the Bund spread, that's more of a driver. I think, right now, pricing through your own curve like we were a few months ago is challenging."
He added that, while deals were getting done and gathering decent demand, it might not be enough of an impetus for every issuer to jump in unless they are keen to do some funding before the summer break.
"Rentenbank today got a very good result and it was great to see them react to the market and pay a decent concession," the third banker said. "This is a sensible level to offer in this kind of market, and the strategy paid off."
In the case of Region Nouvelle-Aquitaine, it was an "important lead order" that helped get the trade off the ground, a lead said. The €100m will-not-grow 20-year sustainable note was a debut for the region as it seeks to increase its bond market visibility. Books closed over €120m, excluding JLM interest.
"We executed over two days given the volatile market backdrop," the lead said. "It allowed us to gather feedback and execute rapidly, with the help of the lead order."
The issue priced at 30bp over interpolated OATs, in line with guidance and in the middle of the trading range for similar French regions.
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