Outside the fraught issuance period of January, it is unusual in the public sector bond markets for borrowers to go head to head on the same day with similar deals when the rest of the week is clear for issuance.
Inter-American Development Bank marked its territory early on Monday by announcing a mandate for a five year dollar benchmark. KfW, which had been thought to be looking at this window for a benchmark execution, announced a mandate hours later with initial price thoughts 2bp wider than IADB’s.
While this may look like a stand-off where neither issuer was prepared to duck out at the last minute, it may simply be a sign of markets to come.
Over the past six months government bond markets — and by proxy supranational and agency markets — have been roiled at points by extreme volatility. Issuers have to take windows of issuance as they come, as they may have disappeared 24 hours later.
For issuers, coming with a similar deal at the same time as another borrower is perhaps not ideal. But Tuesday’s deals haven’t suffered size-wise. IADB raised $2.25bn and KfW $4bn.
Perhaps had each borrower had a clear execution window they could have squeezed pricing in 1bp-2bp, but in markets where the 10 year Bund yield can sell off 20bp in a day, issuers can’t afford to fret over every last basis point.
Investors are perfectly capable of looking at two deals on the same day. And as IADB and KfW’s deals have shown, there is enough depth out there for them to take down two big prints. SSA issuers may just have to get used to sharing their execution windows.