ADB return furthers SSA dollar momentum

LONDON: The Asian Development Bank is reviving its presence in the US dollar benchmark space after a near six-month absence, following the return of fellow SSA names to the currency.

The desire to get the three-year trade done before the summer, as well as buyer interest in new dollar deals, helped drive the offering forward.

"They wanted to do something before the summer," said a lead. "The trade looks tight to Treasuries and people wanted to buy, so it made sense not to wait. The interest in KfW's recent trade and the volatility in dollar rates since nonfarm payrolls also helped."

Books topped US$5.1bn for the US$3.25bn SEC-exempt Jul 2022 Global. The spread was set at mid-swaps plus 7bp, inside the initial marketing level of 8bp area.

"At the guidance, there was probably a premium of 1bp. But it tightened and it's ended up flat to fair value," said the lead.

Bank of America Merrill Lynch, BNP Paribas, Citigroup and TD had begun taking IoIs on Monday for the transaction.  The deal marks the issuer's first US dollar benchmark since it printed a US$3.5bn 2.625% five-year in January at swaps plus 7bp. That trade was backed by over US$5.75bn of orders.

Issuers are also finding traction with taps at the shorter end of the curve, with Nederlandse Waterschapsbank adding US$250m to its US$550m Nov 2020 via Bank of Montreal and NatWest Markets.

"If three-month dollar Libor is 2.34% and what is pretty much an 18-month trade yields something like 2.36% and two-year Treasuries are at 1.9%, you can understand the reasoning," explained a banker on the deal.

The tap takes the total outstanding to US$800m. The spread came in line with guidance at three-month Libor plus 2bp.

KfW kicked off the SSA dollar action last week, taking advantage of improved funding conditions for euro-based issuers given a shift in the three-year basis swap. KfW sold a US$4bn 1.75% Aug 2022 that was the first SSA benchmark in the currency for three weeks.

"The SSA supply in dollars has been weak," said a banker away from the new trades. "The basis has moved a little, which could help a bit, but if you look at volumes compared to last year, it's down."  EAA BOLSTERS SUPPLY

Erste Abwicklungsanstalt is keeping up the flow of US dollar paper with a US$1bn two-year expected tomorrow.

Leads Barclays, Credit Agricole, Commerzbank, Goldman Sachs and TD are initially offering the trade at mid-swaps plus 10bp.

EAA last appeared in the primary market in February to collect US$1.25bn, backed by orders of over US$1.7bn, with a three-year at mid-swaps plus 11bp. The bond is currently quoted at 14.7bp bid, according to Tradeweb.