November 16, 2017 / 5:22 PM / a year ago

World Bank's US$2bn 10-year is "spot on"

LONDON, Nov 16 (IFR) - The World Bank capitalised on a small rise in US Treasury yields to bring a US$2bn 10-year, taking advantage of one of the last windows for the year ahead of the expected Fed hike next month.

The 10-year part of the US dollar market has been treacherous in 2017 and not always easy to access, with some issuers completely bypassing the tenor altogether.

“You can count on one hand the amount of traditional SSA issues in the 10-year and there have been almost none in the seven-year that came to market this year,” said a banker away, adding that the timing was spot on and the pricing at the right level.

The depth of demand for this maturity tends to be in the US$1bn-$1.5bn range, as evidenced by ADB’s US$1.5bn 2.5% Nov 2027 10-year Global three weeks ago.

The World Bank was able to capture a slight rise in the 10-year US Treasury yield, which jumped from 2.33% on November 9 to 2.38% on 14 November. The US$2.4bn book allowed leads to tighten pricing by 1bp to swaps plus 21bp, offering a yield of 2.57%.

While another banker away from the deal said he had “expected a more eye-catching figure” when orders came in, a third banker away noted that getting US$2.4bn in orders was at the upper end of 10-year books this year.

Andrea Dore, head of funding at the World Bank, pointed out that the World Bank’s fiscal year starts at July 1, so that meant it had flexibility.

“We weren’t trying to get US$2bn, but it’s great to have that – it isn’t the end of the fiscal year for us,” she said.


Bankers said the World Bank had started off at a tight pricing level, which would explain why the deal only moved by 1bp.

“It was a risky trade; we had so many things lined up at the same time. On an absolute level versus Treasuries or swap spreads, it’s the tightest for an issuer in this sector,” said a lead.

The banker estimated the new issue premium at 1bp, and noted that just over half of allocations went to central banks and nearly a quarter to asset managers, and nearly another quarter to corporates and financial institutions.

Pricing is important, as the World Bank passes on the costs to its borrowers, but it tries to do so in a sustainable manner, said Dore.

“You wouldn’t see us doing a deal that’s callously priced because we do have to come back to the market,” she said.

“We’ve done three-years during the summer and a five-year at the start of the calendar year. We will be back in the dollar market, looking at other parts of the curve.”

The World Bank has funding needs of US$50bn-$55bn a year.

Since the start of its fiscal year in July, the issuer has printed two US dollar benchmarks and has done over 200 private placements across 22 currencies.

“We’re on target to meet our funding needs,” said Dore.

“We never say that we’re done in the market. In terms of windows for massive benchmarks, as it gets closer to the holidays, you lose some investors. But we’ve done trades even in the summer, and it’s similar in December.” (Reporting by Melissa Song Loong; editing by Helene Durand, Philip Wright)

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