KfW got its second biggest order book for a US dollar deal since 2018 on Wednesday, justifying its decision to fund in the currency even though issuing in the euro market would have been a cheaper option for the German development bank.
The US$4bn June 2028 note got more than US$13.5bn of demand, with only KfW's US$5bn 0.375% July 2025 Global bond printed in 2020 attracting a bigger book, at US$15.4bn, according to IFR. The size of the book enabled leads BMO, Citigroup and Goldman Sachs to set the spread at 34bp over mid-swaps, 2bp in from the 36bp area IPTs. The final spread was less than 5bp back of euros, said Piet Juerging at KfW’s funding team, after adjusting for the cross-currency swap.
The final level mean the issuer left 1bp–1.5bp of concession versus its secondary curve, according to both Juerging and a banker away. But the banker said that European Investment Bank, which he said trades wider than KfW in euros, was trading around 5bp tighter than where the German agency priced its dollar bond, suggesting investors were getting better value from KfW.
“If you’re KfW, you’re probably saying that this is a final NIP of 1bp,” the banker away said. “But you could argue that it’s a lot larger than that, given that EIB is trading a lot tighter.” Tradeweb had EIB’s US$5bn 3.875% March 2028s bid at 29bp over SOFR mid-swaps on the morning of the KfW deal.
The banker away credited EIB’s tighter pricing to its larger dollar presence compared to KfW’s, but Juerging put the spread between the names down to increasing scarcity of EIB paper.
“EIB is one of the tightest credits right now due to larger repayments in the next three years in dollars and in light of a shrinking funding programme. Other credits like [the World Bank] are trading at 34bp for a July 2028.”
A second banker said KfW was pricing in line or even slightly inside peers such as the World Bank.
The KfW print continues the stream of successful transactions in dollars this week despite headlines around the US debt ceiling.
Explaining the deal’s timing, Juerging said: “The euro-to-dollar basis and dollar swap spreads moved in our favour. Likewise, we have seen an increase in rates of more than 40bp in less than two weeks. Certainly, we were facing some headline risk around the debt ceiling issue in the US. However, the success of our transaction ... is a resounding seal of market approval for our dollar benchmark.”