6 May 2014

NIB’s 5-year USD benchmark issue successfully placed

NIB has a long-established strategy of issuing USD benchmark bonds. Benchmarks are issues with a volume of USD 1 billion or more, which are mainly bought by large institutional investors. These securities provide the market with a widely visible pricing reference for NIB’s bonds.

NIB only issues one to two benchmarks a year, so choosing the right moment is very important. The Bank’s funding team has been carefully monitoring the market since the beginning of the year, and decided on 1 April to announce a new benchmark with a five-year maturity (see the news).

Investors responded swiftly and almost USD 1.6 billion in orders for an issue size of USD 1 billion were collected by the joint lead banks, HSBC, JPMorgan, Nomura and TD Securities. The composition of investors broadly followed the pattern seen in earlier transactions. Central banks and official institutions remained the most important investor group for NIB, and bought half of the issue. The second biggest group, is bank liquidity portfolios, took 40% of the issue, thus continuing to gain importance for NIB’s funding programme.

Drawing the attention of a diversified investor base is important, and NIB’s benchmarks transactions attract investors worldwide: almost 50% of orders came from Europe, the Middle East and Africa, about a third from Asia, and almost 20% from the Americas.

The new benchmark offered a yield which was 0.17% higher than a United States Treasury Bond with a similar maturity—a very small difference. Since the pricing, the benchmark has been marked as even more expensive by bond traders. This is not only a gain for existing investors, but also a reassurance for NIB that its credit quality is highly regarded by investors.

P. J. Bye, Managing Director, Global Head of Public Sector Syndicate at HSBC, one of the banks involved, summarised the transaction shortly after pricing: “NIB dollar benchmarks have become a bit of a collector’s item over the years, offering just the right combination of scarcity, credit quality and ongoing liquidity. Hence they were able to command the best pricing any supranational has achieved in the five-year bucket in 2014, and will no doubt enjoy further secondary performance going forward.”

Jens Hellerup, Director, Head of Funding and Investor Relations at the Nordic Investment Bank concluded: “NIB is very happy with the deal. After a shortage of supply of top-tier credit in the five-year segment, we saw a clear window to bring a strong deal to market, at the tightest spread for a five-year transaction from any supranational or agency this year.”