KfW, one of the largest SSA issuers, has funded more than 70% of its recently confirmed annual target, and has plans for two more euro benchmarks and one in dollars for the rest of 2023.
Last week, it sold its first 10 year conventional benchmark in dollars since January 2018, raising $4bn at a spread of 45bp over Sofr mid-swaps or 20.8bp over US Treasuries.
The triple-A rated German agency funded €54bn over the first half of the year. Transactions executed since — including last week’s $4bn trade and a £500m seven year sterling green deal earlier this month — took its funding year-to-date to €60.4bn.
This means KfW has completed 71% of its funding for 2023, after it last week confirmed its target for the year at €85bn.
That figure is at the higher end of the previously communicated €80bn-€85bn range. Last year, KfW funded a record €90bn in international capital markets.
“We reached €60bn in funding so it should be more relaxed for us in the second half, as the amount left to do is less than half of what we’ve already raised,” said Petra Wehlert, head of capital markets, at KfW.
Wehlert said the market was “in good health” overall. “It can definitely be quite volatile, but there will also be opportunities because of the volatility, for example, moves in swap spreads which will have a direct impact on investor demand," she said. "And that will be reflected on our side in terms of overall demand and funding cost.”
A key challenge is figuring out the right windows for issuance. “But it’s pretty positive looking at the overall supply which will be quite muted from our peer group, including the EU,” she said.
More benchmarks in the works
KfW usually restarts its funding earlier after the summer than its peers, in mid-late August.
Last year it issued a $3bn 3.375% two year on August 16, followed immediately by a €5bn five year bond the next day. In 2021, it raised €5bn from a November 2028 line on August 18.
Having already issued four new euro benchmarks this year, Wehlert said KfW plans to sell two more benchmarks in the currency. It also priced seven euro taps from January-June.
KfW aims to bring a euro green deal “in the liquid format” as well. In the first half, it printed €6.7bn in green deals — or 12.5% of the total volume — through seven bonds denominated in five currencies, versus a previously set €10bn minimum target. Of the amount raised so far, €6bn came from two euro benchmarks that were priced in February and May respectively.
In dollars, including last week’s new 2033s, the development bank has sold four benchmarks for $15bn combined, and is “definitely interested in another one”, said Wehlert.
“But of course it all depends on what the opportunities are and where investors are keen to buy,” she said of the issuer’s overall funding plan for the rest of 2023.
“We’re generally quite positive on euros, particularly the seven to 10 year segment on the curve, and positive on fixed income overall,” she added.
“And it’s similar on the dollars side. Our 10 year dollar bond has a very decent yield of more than 4% and that’s for German risk. If you have a view on the currency and on rates, that’s a good investment.”
