Marcin Bill, financial officer, treasury market operations – funding at the IFC, told delegates that ""40-year is a maturity we could consider, we have noted the trades of others this year and it is possible that one day in the future we will issue such paper."
The comments came after Carlos Cala, director of institutional investment solutions group at Wells Fargo, told the Callable Zero Investor Workshop headlined "Where next as sales soar and IRRs plunge?", how the bank’s five 2052 maturity notes came about this year – the first 40-year notes from any issuers since 2007. That series of notes, which amounted to USD450m and added as much as 43 bp yield pick-up, earned Wells Fargo a Landmark recognition at the awards ceremony on Thursday night.
The IFC’s Bill said he remained cautiously optimistic of some pick up in swap rates which had recently stemmed issuance in zeros space. However, Standard Chartered Bank‘s director of rates structuring Herbert Ng told the panel discussion that he expected swap rates to remain anchored for the next year while investors move down the credit curve to bank names for extra yield.
But Ng added that he expects a 40-year IFC note to attract 30-40 basis points more, bringing the IRR up to around 4.0% for the triple A-rated name.
Earlier in the Investors & Dealers Survey, delegates heard that investors, mostly in Taiwan, had a break-even IRR of 3.40% while 30-year swap rates in July had revisited historic lows of 2.194%.
mtn-i data shows that so far in 2012, banks have more than doubled their issuance of USD-denominated zeros to USD8bn and overtaken SSAs in the process.
Although USD- and AUD-denominated zeros are booming, AUD was not on the cards for issuers like Wells Fargo and IFC, delegates heard.
"AUD will continue to be serviced from public placements. AUD denominated zeros would be challenging given the current swap environment," Bill said.
This year, IFC has printed just four 30-year USD zero callables, the two most recent in August and September had IRRs of 3.61% and 3.71% respectively. Meanwhile, the lowest overall 30-year IRR is 3.53% recorded by World Bank in July, followed the same week by Asian Development Bank‘s 3.55%.
If IFC does print 40-year paper, it would not be the first supra to do so. European Investment Bank issued 40-year USD zeros in 2005, as well as a 40-year EUR-denominated zero in February of this year. Asian Development Bank also printed USD 35-year paper in 2008.
But in a sign of how lowly swap rates have influenced low yields recently, the yields on three of the ADB notes back in 2008 ranged between 6.345% and 6.67%.