IADB raised $3bn with a new seven year dollar benchmark sustainable development bond at mid-swaps plus 7bp, 2bp inside of initial price thoughts, via BMO Capital Markets, Citi, Nomura and Wells Fargo Securities. The books were last heard at over $4.5bn.
Meanwhile, British Columbia raised $2.5bn with a new five year dollar benchmark at mid-swap plus 4bp — also 2bp inside initial price thoughts — via BMO Capital Markets, Deutsche Bank, National Bank of Canada Financial, RBC Capital Markets and TD Securities. The books were last heard at over $3.8bn.
“The trades have gone well, but what happens to the market following today’s data release could be interesting,” said a head of SSA syndicate away from the deals. “The CPI inflation data beat expectations so the market could get a bit wobbly.”
US CPI was up 5.4% year on year in June — the highest since August 2008, and substantially above expecations 4.9%.
The stronger than expected inflation data has increased expectations of a rate hike by the Fed before the end of 2022. The yield on three year US Treasuries rose to 0.47% on Tuesday at time of writing, having closed at 0.4% on Monday.
The heavy supply from the US Treasury could also spark more volatility. The Treasury sold some $38bn of 10 year paper on Monday with $24bn at 30 years to follow on Tuesday.
“It’s not too earth shattering at the moment,” said a head of SSA DCM, also away from the deals. “The market is stable. Dollar swap spreads are still very tight and deals are benefiting from supply scarcity.”
More supply is expected to follow in dollars, with a few public sector borrower looking at the market. One more borrower is expected to come to the market this week.