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Soverigns: Market laps up Germany in dollars

Investors snapped up the bonds on rarity value, as Germany went for an early deal

Germany took its bankers' advice last month and moved sooner rather than later to launch its first foreign currency bond since World War II. Deutsche Bank, Goldman Sachs and Morgan Stanley were lead managers. Books on the $5 billion, five-year deal opened in Asia on the morning of Monday May 23. After 36 hours, the deal had attracted a book of around $14 billion. It priced with a re-offer spread of US Treasuries plus 12 basis points, and at dollar Libor minus 31.5bp to swaps.  

59% of the deal went to Asia and half to central banks, indicating that their appetite for dollar assets is still high. Germany was under pressure once it committed to doing a dollar deal in the first half of 2005.

Referendums on the EU constitution, the Federal Reserve meeting, and Germany's desire to tap an existing five-year euro issue all made June a difficult month for the deal.    

"They had to take it now or go immediately after the referendums," says the head of sovereign, supra and agency debt at one European bank. "Germany hit the Asian market on a Monday morning and everybody had got out of their way anyway.

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