- Need for funding unchanged in 2016 at EUR 70–75 billion
- Strong demand for liquid EUR bonds – even with negative yields
- Outstanding access to the market, including in USD, facilitates the issue of liquid global bonds
- Demand for sterling bonds still strong
- 23 Uridashi bonds placed in Japan
FRANKFURT AM MAIN, 18-Jul-2016 — /EuropaWire/ — In the first half of 2016, KfW took out EUR 42.4 billion or 58% of its target funding volume on the international capital markets. The target corridor for the year as a whole remains unchanged at EUR 70-75 billion.
KfW’s global market profile, which ensures access to the EUR and USD markets as well as other foreign currency markets, allows it to address both the current situation on the market and investors’ interests. The strong demand persisted despite low and negative interest rates.
The first half of 2016 was characterised by persistent uncertainty surrounding the economic development in Europe and the rest of the world. The volatility of the market was significantly exacerbated especially by ongoing discussions regarding central bank policy and by the referendum in the UK on membership of the European Union.
KfW once again reacted with great agility to the challenging conditions on the market. The funding result for the first half of the year was once again made up of a greater share of USD (equivalent to around EUR 20 billion, or 47% of the total funds taken out) than the bank’s domestic currency of EUR (around EUR 16.5 billion, or 39%). Demand for USD bonds focused on short to medium maturities. This allowed a total of five USD global bonds with terms of between two and five years to be successfully placed. Demand for KfW’s EUR bonds, on the other hand, was particularly strong in medium and long maturities. Three EUR benchmark bonds were issued with terms of between five and ten years.
The bonds issued in EUR reflect investors’ preferences: Increasingly long terms are being sought after in pursuit of yields. As a result, KfW issued another EUR bond at the start of the year with a maturity of 20 years. However, investors are not even being put off by negative yields. The demand for a EUR benchmark bond with a five years maturity and a negative yield of -0.19% p.a. came to EUR 8 billion, significantly exceeding the issued volume of EUR 5 billion.
It is encouraging that the discussions in the run-up to the UK referendum on membership of the European Union did not have an adverse impact on demand for KfW bonds in GBP. On the contrary: With a total of nine transactions in the first half of the year, bonds were issued in an amount equivalent to around EUR 2.9 billion.
Demand for bonds for private Japanese investors (Uridashi), which KfW has issued since 2002, remains very lively: In the first half of 2016, this allowed it to fund an equivalent value of more than EUR 1 billion from twenty-three transactions, most of which were denominated in Japanese Yen. Considering the persistently strong demand, it is not inconceivable that the prior year’s result of EUR 1.4 billion will be exceeded.
In the first half of the year, “Green Bonds – Made by KfW” were sold in SEK and EUR with a total volume equivalent of EUR 1.1 billion. Further activities in this segment are planned for the second half of the year.
KfW expects conditions on the market to remain unusual in the second half of the year. Markets will continue to be affected by the political and economic shockwaves of the referendum in the UK as well as the approaching presidential elections in the US. The policies of the leading central banks will also continue to exert a strong influence on the capital markets. KfW’s strategy on the international capital markets has always proven successful even in times of uncertainty, and the promotional bank’s flexible approach makes it well-equipped to achieve its funding plans in the second half of the year.
Ms. Nathalie Cahn
Phone +49 69 74 31 20 98
Fax +49 69 74 31 32 66