January 24, 2018 / 5:20 PM / a year ago

KfW back in dollar 10s with a bang

LONDON, Jan 24 (IFR) - KfW returned to the long end of the US dollar market with a bang on Wednesday, attracting over US$6.2bn of demand for a US$3bn trade expected to be priced later today.

The German development bank has not tapped the 10-year tenor since 2015, instead favouring shorter maturities in US dollars.

“We’ve had plenty of good trades in 10-year US dollars, so it’s not like the market hasn’t been opened, but KfW is always keen to take out size and they’ve been able to do that in the euro market,” said a lead.

“But a combination of attractive outright yields, spread to US Treasuries, the shape of the yield curve and the move in swaps spreads all contributed to the success of the trade.”

The 10-year US Treasury yield was at 2.65% on Wednesday, the highest it has been since 2014.

Leads Bank of America Merrill Lynch, JP Morgan and TD started marketing the trade at 23bp area over mid-swaps but were able to revise the level twice - to 22bp area, then 21bp area, for a final print at 20bp over.

“It’s a brilliant trade. They’d been away from that market for three years and one of their concerns was that they weren’t going to be able to get a US$3bn size,” said a banker away.

“They did three €5bn last year for the first time ever, they did more euros than anything else put together last year and if they’d done a US$2bn 10-year when they can do €5bn, it would have looked pretty bad. They need both markets to look good.” (Reporting by Helene Durand; Editing by Philip Wright)

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