Funding EIB in a changing SSA landscape
European Investment Bank (EIB) has a stable funding requirement and a consistent issuance strategy even in the midst of a shifting landscape for supranational, sovereign and agency (SSA) debt. Jorge Grasa, senior funding officer at EIB in Luxembourg, discusses its place in the global and Australian markets.
The past year was a positive one in funding markets, generally speaking. How has the experience been for EIB?
It has been very much business as usual. Our funding programme increased to €65 billion (US$70.7 billion), from €60 billion.
As in previous years, euros and US dollars have been our main currencies, followed in 2024 by sterling, Polish zloty and Australian dollars. In this sense, it has been very stable.
One thing that is changing is issuance dynamics, whereby supranational issuers’ funding requirements are relatively stable while sovereign issuers continue to grow. In Australia, semi-government issuance is one of the big growth stories. Does the supply story concern an issuer like EIB?
As always, we have to read the market well to pick the correct windows and there is always a competition to be first in the market. We will continue to have close dialogue with our banks and investors to make sure we are issuing at the right times, sizes and maturities to execute successful deals.
In the Kangaroo market specifically, the positive thing is that there has been a lot of demand and some very big books were achieved in 2024. Republic of Korea, for instance, issued for the first time in November and the book size for this deal was very impressive.
Some of the demand is focused on relative value. But with levels going a bit wider, hopefully this means another group of investors that is interested in the SSA sector. We would like to at least maintain our share of the Kangaroo market if not to increase it a little – and we are hopeful that we will be able to do so.
Specifically in Australia, 2024 saw a significant uptick in supply from Canadian SSA names in particular. Given these issuers typically offer a little more yield than traditional SSA borrowers, are you concerned that names like EIB could be left on the outside?
The Canadian names have focused mostly on the 10- year part of the curve so far, and largely because this offered them a cost saving relative to other markets they could access in this tenor.
In my view, their presence has really helped this part of the curve. It used to be really dependent on the Japanese bid, which has dried up to some extent, so it is great that the Canadians have uncovered the fact that there is a pool of investors in the long end.
We will see in 2025 whether the Canadian issuers continue to focus on this part of the curve or whether they become more present in the mid-part of the curve, too. Either way, from my perspective their presence in the Australian market is a good development overall.
Is this story of competing supply similar across global markets?
This is certainly the case in Europe. The EU came into the market a few years ago and it now has a massive programme to fund. Individual governments, as you point out, also seem to keep on increasing their access to market. So more and more players are active in the market and we certainly have to be more agile to act and take opportunities when they arise.
