SSAs lurch into the unknown

UNEASE HAS SPREAD to sovereign, supranational and agency issuers. "It’s the most uncertain time ever seen in this market. Every morning, we don’t know what the day will bring. The banks don’t know, the investors don’t know. No one knows," says a European supranational funding head reflecting on the present state of the SSA market.

The source of such uncertainty is the newly minted asset class of government-guaranteed bank paper, in which Barclays launched the first deal on October 24. In its wake, SSA spreads widened against swaps by upwards of 40 basis points. For a market that traditionally moves only single basis points at a time, and has always been seen as a haven from the world’s financial turmoil, these spread moves were completely unprecedented and utterly shocking. It is no wonder that a conversation over appropriate fees paid by SSAs...