Ample demand for vaccine bond exposure and an effective pricing strategy were more than enough to get the International Finance Facility for Immunisation over the line in sterling on Tuesday.
The supranational settled on a no-grow £250m June 2025 vaccine bond following investor calls, starting at IPTs of 95bp area over Gilts. The bond tightened from those IPTs and was healthily oversubscribed – both things that are far from certain in a market that has tested bigger names in recent months. Leads Barclays and TD Securities brought the deal in by 2bp after books grew to more than £415m.
A lead put fair value at around plus 80bp, adding that the level included "a little bit of an entrance premium" – the name has not been in sterling since 2009. Comparables included World Bank, as well as Asian Development Bank and Nordic Investment Bank paper at similar tenors, he said.
"The story's really relevant here," said the lead. "If it hadn't been them, if it had been a more regular SSA borrower that comes six or seven times a year, I don't think they would have gotten the result that they did." He added that "It's really challenging at the moment."
Proceeds will be used to “support Gavi's mission to accelerate the development of vaccines and access to immunisation in developing countries, including access to Covid-19 vaccines through Covax”, the mandate reads.
Two bankers away from the deal said the initial level looked appropriate. One of them, a senior banker, put fair value at around Gilts plus high 80s to 90bp, but emphasised the difficulty of precisely pricing the niche issuer, which has few direct comparables. He said IFFIm is generally 10bp back of World Bank.
Given IFFIm has not been in the sterling market for more than a decade, it did take some work to explain the issuer to some investors, the lead said, noting that there is little overlap between investors active in the sterling market and those buying in US dollars, where IFFIm gets most of its funding.
On top of the ESG draw, IFFIm went to where the interest lies. The short three-year maturity is “definitely where the bulk” of investors are, the senior banker away said. “It’s difficult to go past that.” The lead agreed that the deepest pocket of sterling demand is around the three-year point.
IFFIm’s new trade breaks the silence that asserted itself in the sterling SSA market for fresh issuance at the start of July. It is the month’s first fresh sterling benchmark, according to Refinitiv data, a break in the primary trading patterns established in the past three years, when at least a handful of SSAs have accessed the space by this time in the month.
Amid the volatile summertime conditions, bankers report that they are currently spending their time preparing for the post-summer printing rush.
The lead said that the capital markets could see a flurry of activity after Thursday's ECB meeting, before it settles down again ahead of the Fed announcement next week. Similarly, issuers could take a punt after that meeting, too, he added, though a Bank of England meeting in early August provides another event that could force investors' heads down.
"You might find one or two investors that just want to reposition a little bit on each piece of news, but I don't think you're going to get 20 or 30 that will drive a big deal," said the lead. "Maybe a few taps."