LONDON, Oct 17 (IFR) - KfW’s €3bn five-year flew off the shelves, attracting €8.9bn in orders, making the most of an otherwise mainly empty market.
Barclays, Credit Agricole and DZ Bank set the spread on the Global no-grow at 34bp through mid-swaps.
“There was negative yield from the outset but there was plenty of investor interest,” said a lead.
“Sometimes demand is so big it can’t be satisfied through secondary, which is why you see it reflected in primary.”
A €5bn 0.5% 10-year for KfW €5bn via Citigroup, HSBC and Societe Generale generated a book of more than €10.6bn in September and is said to be the largest for the issuer on a euro trade since 2007.
Fair value was estimated at less 33.5bp, which makes the final spread slightly through, or on the curve.
“There was no new issue concession, it basically priced in line with the outstanding bonds,” said a banker away from the deal.
“It’s quite rare to see KfW tighten by 3bp as the offer size was quite limited for the issuer. Overall a good success that shows there’s a lot of cash in the system.”
Leads initially marketed the trade at 31bp area through mid-swaps.
The lead added that the popularity of the deal shows that a five to seven-year maturity worked well for SSA issuers.
A €3bn long six-year for the European Investment Bank issued last month was followed by European Financial Stability Facility, which did a €3bn six-year last week and was nearly three times subscribed.
KfW’s transaction will likely be its last one in euros for the year, said the lead, as “they could’ve done much more, so they clearly didn’t need the size”.
A few more euro deals are likely to come to market in the coming week as issuers try to squeeze in issuance before the ECB meeting, which could come with a degree of uncertainty given the expectation of a scaling back of the asset purchasing programme.
In the immediate term, the European Union has mandated Barclays, HSBC and UniCredit to lead manage a €300m no grow increase of its existing 0.75% April 4 2031 benchmark.
The proceeds of this funding operation will be used to finance MFA loans. (Reporting by Melissa Song Loong; editing by Helene Durand, Sudip Roy)