BNG amassed over US$4bn of demand for its first US dollar trade of 2023 on Thursday, a US$1.5bn five-year social bond that took advantage of the window following the US CPI number.
Similar to some of its region peers, the Dutch agency has eschewed US dollars in favour of euros in recent years, with arbitrage swaying issuance in favour of the single currency. It printed US$7.6bn through six tranches in 2019 but volumes dwindled to a mere US$2.5bn in 2022. There are signs that this could change, however.
"The basis swap has improved a lot recently, this is very cost-efficient versus and through where a new euro would come," a lead said. "The deal has gone very well and [it was] nice to capture a window all to themselves."
The BNG print is the first SSA bond to clear in the dollar market since issuance paused for last week’s central bank meetings. With a final spread of 45bp over SOFR mid-swaps – 3bp in from IPTs of 48bp area – the deal left buyers with 1bp of new issue concession, another lead said.
"It's a really good deal, and it's tighter than where I would have started it," a banker away said.
Citigroup, Credit Agricole, Daiwa and RBC ran the trade.
“This deal would suggest [the dollar bid] is pretty decent,” the second lead said. “We saw good momentum from the get-go yesterday. … There are no signs that there’s anything other than business as usual [in the dollar market].
“The dollar market is in good shape, it just feels as though there’s not that many candidates focusing on it right now," he said, adding that, while the basis swap had improved for some issuers in terms of what they could achieve in dollars swapped back to euros, it was not quite there for others or it only worked in certain tenors.
A couple of dollar deals are lined up for next week – when the SSA market is expected to pick up pace after the series of central bank meetings and data releases – the second lead said, though he added the euro market is likely going to be the centre of attention, as it has been for most of 2023.
Dollar buyers might be happy to buy more SSA deals, but the slow trickle of supply in the market is not expected to move their price demands.
“There’s still a degree of [price] sensitivity from investors,” the second lead said. “They still demand a fair concession at the outset, but once they’re on board and these deals get momentum there’s then room for issuers to [have more control]. It’s quite well balanced.”