Longer is not necessarily better for many SSA borrowers. Most still largely need to match the tenor of their lending with debt issuance. In a crisis, the loan book may actually shorten for some. In general, SSAs that primarily fund municipalities or local governments in developed countries are likely able to extend the tenor of their debt more than those financing frontline crisis response in developing countries.

BNG Bank’s manager, capital markets and investor relations, Mascha Ketting, says the tenor of the agency’s funding has been extended along with the duration of its assets to enable it to manage its liquidity-coverage and net stable-funding ratios.

By contrast, Jens Hellerup, head of funding and investor relations at Nordic Investment Bank, says its funding in response to the crisis has predominantly been at the short end and that demand for its bonds has also been slightly better in shorter tenors.

In time, lower interest rates may influence lending tenor. Stefan Goebel, treasurer at Rentenbank, envisions demand for longer-dated amortising loans to increase given the eurozone’s flat curve. He says it is likely Rentenbank will seek more funding at tenor beyond 10 years in response. However, he expects the shift to be at the margin.

SSAs tapping markets for long-tenor demand may remain opportunistic, at least for the time being, if the duration of lending books does not rise materially. However, those willing to explore cost-effective, longer-term financing may now have more options available.

The trend for long-tenor demand varies across markets and pockets of investor demand. NRW.BANK’s head of investor relations, Frank Richter, says the currency defines the demand sweet spot. “Maturities offering positive yields were in favour in the euro market so we issued with tenor of up to 15 years in the first half of 2020. After the summer break investors are also buying in shorter maturities – accepting negative yields,” he reveals.

By contrast, he continues, the focus has been more on the mid-part of the curve in the US and Australian dollar markets, leading NRW.BANK to place bonds with 2025 and 2023 maturities.

SSA borrowers with large funding tasks potentially have greater impetus to hit pockets of global demand, including at long tenors. For example, International Finance Corporation issued a 2035-maturity Australian dollar social bond in April. The transaction was for just A$200 million (US$144.7 million) and was narrowly distributed, but it priced inside the issuer’s vanilla curve.

KfW Bankengruppe’s first vice president and head of capital markets, Petra Wehlert, says there have been “rare windows” of opportunity at longer tenor in the US dollar market, one of which the agency was able to tap successfully with a US$2 billion 10-year green bond. The deal was three-times oversubscribed and represented the largest orderbook on a 10-year SSA deal to date in 2020 as well as being KfW’s largest-ever US dollar green-bond book, according to Wehlert.