November 20, 2017 / 12:54 PM / in 4 months

French and German euro issuers take lead in SSA market

LONDON, Nov 20 (IFR) - German states and French agencies are taking the lead this week in the SSA market, with more expected to announce trades in the coming days.

The Federal State of Lower Saxony, the Federal State of Thuringia, and Unedic, the French unemployment insurance agency, hit the market today.

“There’s more to come from France and Germany as some states have found bits and pieces of funding to do. They now have more certainty around tax revenues before year-end,” said a banker.

Thuringia set the spread at 21bp through mid-swaps via leads BayernLB, DekaBank and LBBW for its €250m no-grow due May 2026.

“It’s right on top of fair value. It’s a rare opportunity to get exposure to the name,” said a lead.

The issuer last priced a €500m, 10-year bond in February, and came to market three times in 2016, raising a total of €800m.

Lower Saxony is a more regular issuer, having raised a total of €6.5bn through 14 transactions in 2017.

The state is marketing a six-year, €250m bond via Nord/LB. Guidance is 25bp through mid-swaps.

“All the Laender are priced expensively these days, and German accounts are looking for exposure. German states don’t need much funding anymore,” said a banker away from the deal.

Another banker away from the deals noted that Germany’s political challenges - as efforts to form a coalition government failed - have had little impact on secondaries.

“Bunds quickly came back after trading wider this morning,” he said. Ten-year yields have stabilised at 36bp, after hitting 37bp earlier in the session, according to Tradeweb.

Unedic has set IPTs at FRTR Nov 24 plus 15bp area, via leads Bank of America Merrill Lynch, BNP Paribas, Credit Agricole and DZ Bank.

The seven-year benchmark is documented under the issuer’s Negotiable MTN Programme, which is not explicitly guaranteed by the French government.

“I think this is the longest they’ve done under this programme, after a five-year in January and a four-year last year. That makes it quite an interesting trade,” said a lead. (Reporting by Melissa Song Loong; editing by Sudip Roy, Helen Bartholomew)

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