Head of Treasury: NIB’s bonds attract investors worldwide

Lars Eibeholm, Vice-President, Head of Treasury at NIB.

NIB will continue delivering good quality and stability to investors. “The Bank will remain active in many markets worldwide, even though we are a relative smaller issuer; this helps us keep our funding sources diversified,” says Lars Eibeholm, Vice-President and Head of NIB’s Treasury.

According to Mr Eibeholm, NIB’s funding target for 2014 is EUR 3–4 billion. The success of the funding programme will, to a great extent, depend on the timing of transactions and the ability to be active in different markets.

During last year, NIB issued EUR 4.1 billion in twelve different currencies through 42 different transactions. The US dollar remained the most important currency, with a 39% share of last year’s funding.

Issuing USD benchmarks a strategy cornerstone

“US monetary policy has a big impact on interest rates expectations and, henceforth, on investors’ maturity preferences,” says Mr Eibeholm.

“We are closely monitoring NIB’s bond yields versus the yield on US Treasury securities versus swap rates to identify the right slot for our benchmark.”

Issuing benchmarks along with diversification and low cost will remain the cornerstones of the Bank’s funding strategy. Maintaining its status as an established benchmark issuer is important for NIB.

“A benchmark of at least one billion US dollars makes NIB attractive to large investors. These investors can drive our pricing and visibility to other investors,” Mr Eibeholm explains.

The USD 2 billion three-year transaction NIB issued in early 2013 became the largest US dollaw global benchmark in the Bank’s history.

“NIB responded to the lack of a three-year bond supply. As a result, the buying orders totalled USD 2.7 billion, which was way above our expectations. The book was building up very quickly with a large participation from NIB’s core investor base, particularly the central banks,” says Mr Eibeholm.

This success, however, implied that NIB was not able to issue any more USD benchmarks during the year.

Diversification is of core importance

NIB diversifies by issuing in various currencies and products to reach out to different types of investors.

“This year, we will continue to be active in the Kangaroo, Australian dollar, and Kauri, New Zealand dollar, markets, as well as in a wide range of other currencies and private placement products,” says Mr Eibeholm.

At the end of last year, the Bank’s total outstanding volume in the Kauri market was NZD 1,820 million, which makes NIB the third largest issuer by volume outstanding. A new bond maturing in 2018 for a total of NZD 700 million was issued, which is the biggest Kauri bond from NIB. In December, the Bank was voted “Kauri Issuer of the Year 2013” by the readers of Kanganews, the leading financial magazine for the Kauri and Kangaroo markets.

The Australian dollar market contributed to NIB’s long-dated funding last year. A ten-year transaction launched in 2012 was increased further to AUD 875 million, which makes it the biggest outstanding Kangaroo bond from NIB.

“Long maturities continued to be in high demand throughout the year. Following the success of the ten-year bond sold in 2012 we issued a bond maturing in 2024, which we managed to increase several times during the year, culminating in a total amount of AUD 525 million,” says Mr Eibeholm.

Closer to home, NIB was active in the Nordic currencies with a new five-year, NOK 750 million bond and an increase of the existing bond maturing in 2017; the outstanding volume reached two billion Norwegian kroner. Further, two Swedish kronor five-year bonds of SEK 500 million were issued.

“We’re happy to issue in Nordic currencies, since we can fund lending projects in the same currencies,” says Mr Eibeholm.

Green bond programme continues

Supporting NIB’s environmental mission as a visible green bond issuer is also a path NIB will continue to pursue in 2014.

“NIB is one of the few supranationals with an explicit green mandate, so it fits very well that we use our very best green assets for the NIB Environmental Bond (NEB) programme. We expect it to develop further in the coming years,” says Mr Eibeholm.

NEB is the Bank’s framework for green bonds. In 2013, the Bank issued two five-year notes under the NEB facility: one of SEK 500 million for Nordic investors and another of BRL 344 million targeted at Japanese retail investors.

Central banks a major investor group

For many years, the most important investor base for NIB has been central banks and 2013 was no exception as they accounted for 40% of new funding.

“Central banks are attracted by the high credit quality and price stability of NIB’s bonds. These investors have contributed to the fact that NIB’s bond prices are among the most valued in the whole world.”

The remaining 60% was equally split between asset managers, bank treasuries, pension and insurance companies and retail investors.

NIB a global issuer

“Although we are a small player and do not issue benchmarks too often, we work with investors in a number of major international markets,” says Mr Eibeholm.

“Our investors around the world appreciate the good quality of our credit and we will do our best for our brand to remain visible and competitive in the markets in 2014.”

Asia, including Japan, accounts for 38%, the largest share of NIB’s investor pool. In Japan, NIB has a broad variety of investors, including retail, asset managers and official institutions. Historically, Japanese investors have accounted for 10–20% of the Bank’s total investor base. Europe follows with 34%. Many of them are institutional investors. The issuing activity of recent years has lifted the shares of the Australian and New Zealand markets, which make up slightly above 10% each. In these markets, the Bank’s main investor groups are bank treasuries and asset managers.