Debt market opens strongly on fragile ground

The global debt capital markets witnessed a strong start in early 2011. The volumes of new USD-denominated issues exceeded USD 35 billion in supranational, sovereign and agencies (SSA) benchmark issuance. This marks an almost 50% surge on the same period in 2010.

Also SSA transactions in EUR were met with significant and strong investor demand. It was particularly well illustrated by the European Union’s and European Financial Stability Facility’s successful 5-year transactions. These developments, positive for the financial markets and European institutions, took place on the fragile ground of the European sovereign debt crisis.

With its smaller funding programme and strong Nordic owners, NIB is still in a good position in the global capital markets. During 2011, NIB plans to launch one or two benchmarks in USD and/or EUR, and to complement this with private placements and other public transactions in order to achieve the desired diversification of global investor base and currency distribution.

In early January, the Sterling market opened up for attractive funding for SSA borrowers. NIB seized the opportunity and was one of the very first issuers to enter the Sterling market in the new year. Having originally aimed at GBP 200 million in a new December 2013 bond, strong investor demand led the deal to be increased to a final size of GBP 300 million, successfully marking NIB’s first Sterling benchmark transaction since 2008.

In the third week of the year, the Bank responded to the strong USD market for SSA issuers, and the positive momentum created by the World Bank’s 5-year transaction that same week, by launching a new 5-year global USD 1 billion benchmark transaction. The issue, with a final maturity of March 2016 and a 2.25% coupon, was priced with a spread of +6 basis points to LIBOR – only 5 basis points behind the World Bank’s 5-year transaction.

“The Sterling and USD benchmark transactions show once again that NIB has the organisational flexibility to act rapidly to market opportunities when they arise, while simultaneously executing successful and oversubscribed transactions,” says Lars Eibeholm, Vice President, CFO and Head of Treasury at NIB.

With over 30% of the funding programme already achieved and the announced increase in the authorised capital base soon expected to be completed, NIB is in a comfortable position and is well-equipped to face the challenging debt market conditions.