Even though SSA issuers priced more benchmarks this year than last and in greater volume, they commanded more pricing power than the previous year.
In the year to November 11, sovereign, sub-sovereign, supranational and agency (SSA) issuers raised more than $900bn-equivalent through syndicated benchmarks across euros, dollars and sterling, according to data from GlobalCapital’s Primary Market Monitor.
The volume represented a 22% year-on-year increase, with the number of bonds sold rising by 19%.
The average size of a benchmark was also up on last year at $1.98bn-equivalent, from $1.93bn in the same period in 2023.
Meanwhile, issuers tightened the spread on their benchmarks during bookbuilding on average by 1.96bp this year, up from 1.89bp during the same period last year.
The average new issue premium (NIP) paid fell by 0.7bp to 1.5bp.
In line with this, deals were better covered in 2024, with order books an average of 4.2 times deal size versus 3.7 times in 2023.
As swap spreads tightened, the spreads SSA issuers paid widened versus swaps but compressed against government bond benchmarks. The average swap spread was 33bp across euros, dollars and sterling in 2024, versus 26bp in the same spell in 2023. Over the same period, the average govvie spread dropped to just over 38bp from 51bp.
SSA euro benchmark average new issue premium
Source: GlobalCapital’s Primary Market Monitor
Euros shifted
Most SSA benchmark volume this year came from the euro market, with nearly €526bn priced — a 21.6% jump year-on-year.
The average size, tenor and spread tightening during execution in the euro market this year was similar to 2023, at around €1.95bn, 10.2 years and 2bp, respectively. The bid-to-cover ratio improved to five times from 4.6 times a year ago, and the average NIP paid fell to 1.7bp from 2.4bp.
The average spread to mid-swaps for euro SSA new issues almost doubled, however, to 25bp from just 12bp in 2023. Meanwhile, the average spread to Bunds declined to 56bp from 72bp.
Front-loading was a theme this year, too. SSA issuers did 77% of their benchmark volume in the first seven months of the of the year to November 11.
Those bonds issued earlier in the year were supported by buoyant market conditions. The average size of a euro benchmark in this period was €2bn versus €1.83bn between August and November 11.
The average tenor was also longer at 10.7 years versus 8.6 years from August onwards and demand was higher too. Benchmarks were 5.1 times subscribed on average, as opposed to 4.5 times from August. Issuers were able to move pricing during syndication by an average of 2.1bp before August but only 1.7bp on average from August.
SSA dollar benchmark average new issue premium
Source: GlobalCapital’s Primary Market Monitor
Dollars, sterling stable
The dollar market proved attractive for many SSAs as, overall, they funded 19% more through dollar benchmarks compared to the same period in 2023.
The average deal size reduced to $1.89bn from $1.92bn year on year, but issuers were able to fund for 0.4 years longer on average.
This year’s dollar SSA bonds were also better covered at 3.3 times deal size versus last year’s average of 2.3 times. As a result, issuers were able to tighten by 2.5bp during bookbuilding this year, up from 2.3bp in the same period in 2023.
That demand also helped SSA issuers pay lower NIPs on average – 1.1bp this year, nearly a full basis point lower than in 2023.
The average spread to swaps was also steadier compared to those in euros, rising only 1bp from a year ago to 47.2bp. Meanwhile, spreads to US Treasuries compressed to an average of 22.5bp from 29.1bp.