A trio of pulled SSA deals in June have shown what happens when issuers and bankers get the now complicated calculus of timing, pricing and tenor, wrong. Pragmatism is the name of the game for issuers in the increasingly challenging primary markets, bankers have told IFR: offering the right concessions and, more importantly, coming at the right time.
Each of the trades had their own, specific reasons for failing, but those idiosyncrasies don’t hide the fact that market conditions have made it much easier for issuers to trip-up.
CDPQ’s relatively limited buyer base at a time when investors are closing books as a turbulent H1 comes to an end may explain its postponed September 2025 US dollar appearance this week. Sagess’ €500m seven-year appeared to be a victim of its unclear position between corporate and SSA paper. And EAA’s two-year US dollar deal was seen to come a cropper of volatility, though one banker away said the pricing looked tight.
Even with those reasons, June’s failed benchmarks offer little to soften the message that the market has hard but ill-defined edges that are all too easy to run aground on.
“Some of the trades simply don’t work,” a syndicate banker said. "Obviously, before [books open] it’s super hard to see that, otherwise you would not come to the market. I don’t really think it’s something you need to be too worried about, or too ashamed about if you’re part of that deal because it happens these days because uncertainty is so high.”
Or, as a syndicate head put it: “You’re well-advised to copy-and-paste some of those pulled messages, because it won’t be the last time it happens.”
All three of the pulled deals come from less-frequent and less-liquid names, but even established issuers like the African Development Bank and Agence Francaise de Developpement have struggled to get oversubscribed deals in June, indicating the harsh climate isn’t a problem confined to the niche or infrequent borrower.
Marks from the rough market can be found on the month’s biggest trades. Both the European Union and KfW paid concessions of around 5bp at guidance to kick-off interest in recent euro outings. In the end the EU managed to tighten by 2bp and KfW by 1bp. The European Union issued a €5bn February 2048 green bond at mid-swaps plus 28bp and the German Agency inked a €4bn green November 2029 deal at mid-swaps minus 16bp.
That pair did have their advantages though. The syndicate head said that: “Currently, the focus is on mainstream names with a concession.”
Even with the headwinds, none of the bankers IFR spoke to said SSAs are worried by conditions.
Timing
Pricing, usually the primary concern, has taken a back seat for many bankers. Timing is now of paramount importance.
“The main question at the moment is timing,” an SSA origination banker said. “It’s very difficult to judge what’s a good time and what’s a bad time because the intra-day volatility is immense. We used to look at central bank policy meetings and occasionally non-farm payrolls and avoid them. Now we have to look at that and inflation data [and growth numbers]," he said.
That leaves a lack of obvious opportunities in which to issue.
“When you get a clear window, you get a lot of deals all at the same time, like we did last week," he said. The Global Borrowers Conference last week would have been expected to keep a lid on issuance, the SSA origination banker said, but that proved to be far from the case with six SSA euro and US dollar prints across Tuesday and Wednesday.
When windows do present themselves, issuers are going to have to be flexible enough to capitalise on them.
“It’s going to be the classic case of being nimble when the market’s there,” the syndicate head said. "Maybe being slightly more conservative in your expectations and readjusting to the moves we’ve seen from guidance to final pricing.”
Being nimble and getting access to the market may mean deferring to the demands of investors, who are now firmly sat at the steering wheel – with less favoured, less liquid names suffering as a result.
“The pendulum has very much swung in favour of the investor,” the syndicate head said. “Investors are going to ask for a large new issue concession, a more straightforward maturity and, frankly, a more straightforward name. Anything that’s a bit new or small is going to be difficult.”
H2 looms
Volatility and the administration involved at the end of H1 is going to close the market for most names for the rest of the week. It’s unclear what mood buyers will be in at the start of July, the senior banker said, whether they will still be investing, or whether they will take the summer off in anticipation of cheaper paper in September’s typically busy market. “I’m not extremely optimistic for July,” he said. Trades early in H2 are going to “have to come at a generous price”.
CDPQ’s pulled trade is “a clear warning that investors are nervous.”
“There’s limited room for mistakes," said the senior banker. "It has to be the right maturity, it has to be the right pricing, the right concession. To see a dollar trade postponed is extremely rare, so I think this is a big warning to issuers: be pragmatic, be reasonable, and trades will be done. Don’t force it.”