The Inter-American Development Bank was back with its third foray in sterling of 2022 on Monday, a transaction which unlike the issuer's two previous outings did not quite provoke investors' keen interest.
The supranational made a surprise appearance in what is expected to be a quiet two to three weeks before issuance restarts in earnest in the middle of August.
"You might ask why this is coming in the midst of the summer break but we made sure investors were at the desk and ready to buy before announcing the trade," a DCM banker said. "The rate volatility has been horrid, so, for issuers, it's good to take the opportunity to do something when it arises."
Barclays, Deutsche Bank and HSBC started marketing the seven-year Sustainable Development Bond at 56bp area over the 0.5% January 2029 Gilt, equivalent to around 21bp over Sonia. It priced in line with guidance. At the last update, books for the £300m deal had passed the £200m mark, suggesting the transaction had not quite managed to cross the line.
"We don't really talk about fair value, the conversation is more about what the Sonia spread is and what works," the banker said. "Sterling screen levels don't really tell you a lot; the market is quite dislocated."
A banker away said the plus 56bp level offered a low teens concession versus where secondaries were marked.
"But we all know that where stuff is marked is not really a useful indicator of where deals can price," he said. "You price deals where it makes sense and where you think investors will be happy to buy. I think Sonia plus 20ish is about right."
The trade is the third time the supranational has come to the sterling market in a relatively short period of time. It priced a £500 December 2028 and a £500m July 2027 in April and June, respectively.
"The levels in sterling for top-tier names actually look advantageous versus US dollars because swap spreads have widened, so you can meet investors and issuers' targets, it's a happy marriage," the DCM banker said.
The banker away put the level at flattish to US dollars. "But you can't get seven-years dollars," he said.
At £300m, the size was smaller than IDB's two previous visits in the currency.
"It's never going to be a £1bn trade," the DCM banker said. "They did £500m in April and June and here we're in a quieter period, so it was more a question of having key investors around to buy."
While primary flows are expected to be quiet overall, two issuers are looking for funding in euros and US dollars.
The State of Berlin has mandated Commerzbank, HSBC, LBBW, NordLB and UniCredit for a €500m 10-year. "The Laender are always looking to get some funding done," the DCM banker said. "If you look at volumes this year, they are down versus last year's, so it makes sense for them to see if they can do things opportunistically."
In dollars, Swedish Export Credit Corporation is marketing a benchmark-sized four-year FRN at SOFR plus 57bp area via Barclays, Daiwa and Nomura.