Ostensibly, 2005 began in blistering fashion for the cream of Europe’s supranational borrowers in the dollar market. Within 48 hours of one another in the second week of January, the European Investment Bank and KfW printed exceptionally well-supported three-year and five-year transactions, raising $3 billion apiece. For KfW, in particular, which in the same week generated demand of €11 billion for a €5 billion deal that was its first ever 15-year euro benchmark, the dollar transaction – its largest five-year since 2002 – wrapped up an especially satisfying week.
“We closed the book within about 24 hours with a level of demand we had not seen in the dollar market for at least two years,” says Horst Seissinger, head of capital markets at KfW’s Frankfurt headquarters.
Good start
That’s fair enough. But as bankers point out, both the EIB and KfW needed to pay up to ensure that they kicked off their dollar issuance for 2006 so successfully. The EIB deal priced at 25 basis points over the US treasury curve, with KfW’s longer deal paying 33bp over – equivalent to Libor less 19.5bp and 16bp respectively. Those levels amounted to a marginal cheapening of both borrowers’ dollar curve, which raised a few eyebrows among investment bankers.