November 9, 2017 / 3:52 PM / a year ago

EFSF wraps up year with fresh liquidity across the curve

LONDON, Nov 9 (IFR) - The European Financial Stability Facility has wrapped up the funding year with successful taps of its 2027 and 2048 bonds.

EFSF saw pools of liquidity deepening at the medium and longer end of the curve, as it tapped its bonds at no new issue premium and a 2bp NIP, respectively, via leads Barclays, DZ Bank and Nomura.

The €1.5bn Jul 2027s were priced at 20bp through mid-swaps, and the €1.3bn Jul 2048s at 3bp through. Final books were over €3.4bn and €3bn, both excluding joint lead managers.

“From a strategic perspective we tapped all parts of the curve within one month, including the €3bn six-year we did last month,” said Siegfried Ruhl, head of funding and investor relations.

“We wanted to remain flexible, so we hadn’t given investors an indication of the split between the two tranches. The demand for the 30-year was stronger than expected.”

Despite EFSF having €49bn to fund this year - making 2017 its second-largest programme ever - to have printed €1.3bn at the long end of the curve at only a 2bp NIP was a great result, bankers said.

A lead on the transaction said that the yield target of 1.5% was important for long-dated investors. He said they were comfortable with the deal as the prospect of interest rate hikes is still a while away.

“Yields and spreads at the long end have rallied quite strongly since summer. At the outset we thought that that would deter some investors, and were surprised getting the book size that we did.”

The deals completed what was a challenging funding programme for EFSF, according to Ruhl.

“We had to do a lot at the long end and issued in an environment of high political uncertainty with a lot of elections and ECB policy decisions,” he said.

Over the past year the EFSF has had a presence on all parts of the curve.

“EFSF tends to be driven by a combination of maturity needs and paying close attention to what investors want. It goes where demand is, within reason,” said the lead banker.

A banker away from the deal said that the EFSF taps were the highlight of the week.

“Anything within the 10-year sector coming at no new issue premium shows that issuers can get the prices they want.” (Reporting by Melissa Song Loong; editing by Sudip Roy, Ian Edmondson)

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