IDB launches dual tranche $1 billion 2-Yr and $1.5 billion 7-Year fixed rate global bonds

The Inter-American Development Bank (“IADB” or “IDB”), rated Aaa/AAA (Moody’s/S&P), today priced a new dual tranche $1 billion 1.875% 2-year and $1.5 billion 2.000% 7-year fixed rate global bond.

The 2-year note pays a semi-annual coupon of 1.875%, matures on 23 July 2021 and priced with a spread of 3bps over mid-swaps and 5.75bps over the UST 1.625% due June 2021, which represents a yield of 1.924% s.a. The new 7-year note pays a semi-annual coupon of 2.000%, matures on 23 July 2026 and priced with a spread of 14bps over mid-swaps and 8.4bps over the UST 1.875% due June 2026 representing a yield of 2.087%.

The transaction marks IDB’s third foray into the USD capital markets in fixed rate Benchmark format following the $3.25 billion 5-year benchmark in January and the $2.1 billion 10-year benchmark executed in June.

With the dual tranche strategy, the IDB has now refreshed most of the key maturities in the USD market (2, 5, 7 and 10 year) and it is the only Supranational that has successfully accessed the long-end of the USD curve in 2019 (now in both 7Ys and 10Ys).

Distribution for both tranches were very similar, with EMEA and Asia dominating by geography, while Central Banks/Official Institutions and Banks dominated by type.

“In the past week or so, we noticed active secondary market activity and investor interest in the 2- and 7-year parts of the curve. It gave us confidence to issue our first ever dual-tranche transaction. We are very happy with the outcome as the “spot-on” pricing and timing generated strong and solid diversified investor demand for a successful outing in a volatile market,” said Laura Fan, Head of Funding at the Inter-American Development Bank.

Investor Distribution:

2-Year 

7-Year 

Overview of the IDB:

• The IDB is a multilateral development institution established in 1959.
• It is the largest government owned regional source of development finance for Latin America and the Caribbean.
• The IDB is owned by 48 countries, including 26 Latin American and Caribbean countries and 22 non-borrowing member countries.
• Information on bonds for investors is available on the IDB website: http://www.iadb.org/investors.  
• With this issue, the IDB has completed USD14.3bln (70%) of an estimated USD 20.5bln borrowing program for 2019.

Bond Summary Terms:

Joint Lead Manager Quotes:

“IDB’s strong investor following across the curve was once again demonstrated with the successful pricing of today’s dual tranche. Seven years in particular is considered a challenging maturity so to price such a large size (US1.5Bln) at such a low treasury spread (+8.4bps) is very impressive.”
Adrien de Naurois, Head of SSA at BofA Merrill Lynch Bank of America Merrill Lynch

“IADB has once again demonstrated its ability to respond flexibly to market conditions and investors’ needs with today’s transaction, it’s first ever dual-tranche Global benchmark.  IDB’s rarity value at the shorter-end of the curve combined with its consistent presence in tenors longer than 5-years (IDB is one of only two issuers to offer investors access to longer-dated assets in USD this year), has resulted in a high-quality orderbook dominated by central banks and bank treasuries. Congratulations to IDB on a very successful trade.”
Sarah Lovedee, Executive Director, SSA DCM, J.P. Morgan

“The IDB has once again demonstrated their global investor appeal, this time across duration requirements, with their inaugural dual tranche. Both the 2Y and 7Y tranches are rare maturities from the Supra community but is in keeping with IDBs strategy to refresh their curve annually - which has resulted in successful 2Y, 5Y, 7Y and 10Y USD Benchmarks so far this year. The IDB continues to provide the market with desired duration and is the only Supra to have issued a 7Y and/or indeed a 10Y in 2019 to great success.”
Mark Yeomans, Executive Director, SSA DCM, Nomura

“A very adept tactical move by IDB which successfully avoided congestion in other maturities while still achieving their target duration at a great level. All the more impressive when you consider where the issue was able to price versus Treasuries while maintain a very high-quality investor distribution."
Jigme Shingsar, Managing Director SSA DCM, RBC Capital Markets