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Capital Markets

Frequent borrowers: Higher demand for SSA, but second tier pay more

International supranational, sovereign and agency borrowers raised billions in dollar issuance during the first half of the year. This was a continuation of 2007, when volumes from supras and European agencies rose 14% to €241 billion, according to Dealogic. The dollar activity was driven, in large part, by central bank investors that were attracted by wide swap spreads and their wish to diversify away from the government-sponsored enterprises. The woes of the GSEs have increased and the high-level investor sponsorship the European Investment Bank received at the end of August for its $4 billion three-year issue, led by BarCap, Citi and JPMorgan, illustrates the state of the frequent borrower sector.

"Prior to the opening of bookbuilding it wasn’t obvious that a $4 billion transaction would be straightforward. We certainly had no expectations of a book in excess of $8 billion within just a few hours. New players are coming into the global market – and established investors are playing in increasingly massive size. We could have driven on to a $10 billion order book, and a substantially bigger deal. The reason for that? The EIB’s dollar bonds are trading in the secondary market at Libor less 55," says Philip Brown, head of public sector origination, EMEA, at Citi.

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