Unusual Times

Sovereigns, supranationals and agencies were quick to take advantage of an improved bond issuance tone in March, embarking on the task of raising the huge quantities of capital needed to address the short and long-term implications of Covid-19. Financing the response had to begin as soon as possible and pandemic-linked debt from SSAs soon appeared in a number of guises: labelled social and sustainable bonds, Covid-themed bonds and conventional paper. “There’s been an increase in social bond-type activity as economies have fallen,” said...

Germany has been turning to international capital markets on an unprecedented scale as the federal and regional governments seek additional funding for their responses to the coronavirus crisis. The landmark of a first ever syndication of a conventional Bund highlights this new push, while the Laender - having unexpectedly led the entire SSA sector’s reopening in March - have ramped up activity notably too. “The federal and regional governments have been faced with unprecedented challenges - their financing needs ballooning due to a combination...

The International Monetary Fund is forecasting that Africa’s GDP will shrink by 1.6% in 2020 - its worst result ever recorded - while the World Bank has warned the continent could slip into its first recession in 25 years. Until now, the region has largely escaped the direct health impact of Covid-19 but the global economic slump and extended lockdowns in many African nations will exact a severe economic toll on the region. The UN Development Programme says almost half of all jobs in Africa are at risk. The issue for many African nations is the...

Just weeks after the UK DMO set its 2020 funding target, Covid-19 hit and it was forced to redraw its borrowing plans, upping the pace and scale of its issuance programme as the treasury unveiled a series of measures to support companies and individuals through lockdown. In April, the DMO raised its Gilts sales target to £45bn, before announcing plans to raise an additional £180bn between May 1 and the end of July 2020, bringing its total target for the first seven months of the year to £225bn, compared to £220bn raised across the full...

With the eurozone’s periphery severely hit by the coronavirus pandemic, sovereigns and public sector entities from across the Mediterranean region stepped up their funding in international bond markets. Their new push culminated in as much as €31bn raised by key issuers Italy and Spain on consecutive record-breaking days in April. “In the periphery, we saw sovereign issuers reacting very quickly to the new funding situation, adjusting their borrowing programmes in a number of different ways,” said Pierre Blandin, global head of SSA DCM at...

In Brazil, populist far-right president Jair Bolsonaro dismissed Covid-19 as media ‘hysteria’ and just ‘a little flu’, while Mexico’s leftist president Andres Manuel Lopez Obrador initially downplayed the risks, urging Mexicans to continue embracing each other and eating out at restaurants. As recently as mid-March, he was still attending political rallies and hugging and kissing supporters. At a news conference a few days later, he took out his wallet and showed off the religious amulets that he claims will shield him from the virus. It was...

In his book about the July 1914 crisis, American historian Michael Neiberg says that the declaration of war hit the great majority of Europeans “like a thunderbolt out of a clear blue sky”. Similarly, the Covid-19 pandemic of 2020 was entirely unexpected, and though its ramifications might not be as far-reaching or as traumatic as the 1914-1918 world war, global economies will be living with its effect for a long time to come. The US federal budget deficit was just a little shy of US$1trn before the vast array of stimulus packages unleashed...

When the Australian Office of Financial Management brought its A$19bn (US$12.2bn) 1% new 10-year bond to market in mid-May, it was the largest issue ever seen Down Under. More to the point, the record-breaking book of A$53.5bn which was managed by ANZ, Citigroup, CBA and UBS, showed quite how much demand there currently is for Australian sovereign paper, not only from onshore but also from offshore investors. Indeed, the previous record had come from the AOFM only a month previously with the sale of A$13bn 0.25% four-year paper that saw...

Since the advent in March of the “Covid era” - which looks likely to last for a considerable time, barring the emergence of a reliable and safe vaccine - SSAs such as International Financing Corporation, African Development Bank, Nordic Investment Bank, European Investment Bank, Cassa depositi e prestiti, Bpifrance, Caisse Francaise de Financement Local and Instituto de Credito Oficial have issued social bonds in US dollars and euros in response to Covid-19, totalling US$9.4bn-equivalent. But within the Asia-Pacific region, much of the SSA...