KfW

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.

Sovereign, supranational and agency Kangaroo issuance in 2015 so far reached over A$4bn ($3.3bn) this week, topping volumes in the format for the whole of January 2014. The news comes as Nederlandse Waterschapsbank announced a new Kangaroo line and KfW reopened a five year bond in the currency.

KfW opened books on a tap of a 10 year Kangaroo on Tuesday as issuers took over A$1bn ($841.6m) out of the Australian dollar market, with deals from Inter-American Development Bank, the Province of Manitoba and Rentenbank.

KfW, Asian Development Bank and Agence Française de Développement will sell dollar benchmarks on Tuesday in what SSA bankers said is a calmer backdrop than last week. Export-Import Bank of Korea was first to come to market in dollars this week and was set to price a dual tranche deal during the New York day on Monday as GlobalCapital went to press.

Attractive funding rates and strong demand from Asian investors drew a flock of supranational and agency names to Australian dollars this week — and bankers say at least six names are looking to print in a market that often offers more attractive funding levels than dollars or euros.

The European Investment Bank and KfW completed their first sterling deals of 2015 on Thursday, 8 January, in what bankers said was a sign of more to come, as the sterling/euro basis swap is well in favour of euro based issuers.

KfW showed that pricing through mid-swaps is no obstacle at the start of 2015, as on Thursday it built a comfortably oversubscribed book on the first euro deal to come through swaps this year. The issuer plumped for a 10 year deal — an option also taken by Province of Quebec on Thursday and a tenor that many SSA officials think the European Financial Stability Facility will take next week.