Tight pricing, investor fatigue weigh on World Bank 10-year

Issuers are testing the US dollar market with challenging deals including World Bank with a 10-year Global and the third bond in as many months from HSH Portfolio management.

The World Bank is back after just under three months, trying out the longer maturity having issued a total US$12bn at three and five-years already this year.

“There’s been a sell-off on Friday, so the yield was attractive (for investors). They’ve not been that active this year in benchmarks,” said a lead.

Leads Barclays, BNP Paribas, Nomura and TD are marketing the SEC-exempt Global at 21bp area over mid-swaps – a tightening of 1bp from yesterday’s IPTs.

“We see it as a new issue premium of 2bp. It isn’t crazily generous, none of the deals have been recently. They’re not looking to raise significant volume,” said the lead.

The World Bank’sUS$1.25bn Oct 2026s were trading at swaps plus 20bp before the mandate was announced with ADB’s US1.5bn Nov 2027s at 19bp, according to Thomson Reuters data.

Indications of interest were over US$1.3bn this morning, which a banker away from the deal thought looked “a bit weak”.

“They might be happy with that level if they aren’t after size, but I think it indicates a bit of fatigue on the investor side. On the other hand, the tight pricing didn’t leave much on the table,” he said.

HSH Portfoliomanagement, the German bad bank, was also slow this morning with overnight IoIs of US$465m, although books later grew to over US$900m.

“It’s not the easiest name to sell. But it’s doing all right and looks quite cheap,” said a banker away from the deal.

The spread for the US$500m Reg S four-year floater has been set at 33bp over three-month Libor via Citigroup, HSBC and JP Morgan.

IPTs yesterday were mid 30s ahead of guidance this morning at 35bp area.

Bankers expect a few other dollar issuers in the market this week with benchmarks, likely representing the completion of many issuers’ funding programmes for the year.