KfW

KfW has taken a further step toward diversifying the green asset class by printing the largest ever Australian dollar green bond. But on the eve of new green bond guidelines being published on Friday, supply is still lacking, according to specialists.

Top tier supranational and agency issuers are likely to focus on dollar deals in the coming weeks because of tricky pricing metrics in euros, according to SSA bankers.

KfW equalled its largest ever size for a five year dollar benchmark on Thursday, in its first visit to the belly of the curve in over a year.

European investors showed up in force on Thursday for KfW’s debut green Kangaroo, which is also the largest green print ever in Australian dollars.

A German agency looks set to be the only SSA issuer to test demand in dollars this week, after mandating banks on Wednesday for a five year deal.

KfW has opened books on its first ever green Kangaroo bond, which is only the second syndicated deal in the format from an SSA issuer.

Demand for callable MTNs from sovereign, supranational and agency issuers has skyrocketed in 2015 but, when short term rates start rising in the US, investors could be left holding expensive paper. While many issuers will come to the rescue and buy back on demand, some buyers will have to live with their investment.

Private placement investors are having to confront negative yields up to five years on the maturity curve as the European Central Bank’s announcement of quantitative easing and a flight to safety after concerns over the stability of the euro drive spreads in Europe even tighter. While some investors are buying structured notes to gain a positive return, some may have no other option.

KfW has made its first ever foray into Indian rupees and it is keen to do more in the currency. It joins a growing band of supranationals and agencies dabbling in the currency's offshore and onshore bond markets.

Public sector borrowers will feel the pressure in February to catch up on funding after the European Central Bank all but stopped new issuance at the end of January — SSAs’ busiest month of the year. The announcement of quantitative easing caused bond yields to tumble and left issuers and bankers puzzled over where they could price a new benchmark.

KfW is set to delve into the Canadian dollar bond market for the first time since October, after mandating banks for a deal on Monday.

Sovereign, supranational and agency issuers were able to raise $10.5bn of bonds in dollars this week, despite volatility in US rates and Treasury yields plunging ever lower.