Research Team at Rabobank, suggests that the Easter break gave pause for thought for many SSA issuers, with only a handful of deals pricing in EUR and USD over the past week. Key Quotes “Notable was the European Stability Mechanism’s (ESM) tap of a 21 year bond (1.625%) which priced at MS+13bps, bringing the total size of the issue to EUR2.5bn (initially priced 17/11/15). Demand for the funding was particularly strong in Europe, where a total of 83% of the deal was absorbed, 53% of which was taken by fund managers, 25% by ‘Banks’, 15% by ‘pension funds/ insurance’ and 7% by ‘CB’s/Govt/ Sovereign funds. Looking across what has amounted to a successful opening quarter for the issuer, the ESM began 2016 with a dual tranche priced on 23 February: a new 10-year bond which raised EUR3.0bn and a tap increasing the December 2055 bond by EUR1.0 to EUR2.0bn. Earlier this month (9 March), the ESM tapped the November 2020 via auction for EUR992.75mn bringing the outstanding size of the bond to almost EUR5.0bn. The total funding requirement for the first quarter was completed with a final tap for EUR1.0bn. The ESM is scheduled to raise EUR6.0bn in Q2. This is a reduction from the previously announced EUR9.0bn due to 1) The programme for Cyprus will expire at the end of March and it is not expected that the remaining EUR2.668bn will be disbursed and; 2) Since the launch of the ESM N-Bond programme at the beginning of the year, ESM has raised EUR185 million in N-Bonds. Traders’ view SSAs remained universally well bid over the week and the interesting feature is that the sector currently appeals to many investors for a diverse array of reasons. At the short end, we have sold AGFRNC to investors who swapped them into floating dollars, we also sold Lander and ASFINAG to clients who swapped them versus EONIA. Many other accounts prefer the yield on SSAs to the alternatives provided by government bonds or the Depo rate (-40bp) while we have also seen interest in EU & Länder from the ‘Eurosystem’ executing the PSPP.” For more information, read our latest forex news.