The transaction, which is being lead managed by Grand Cathay Securities, is the first this year but sixth in all from the issuer.
EBRD is a triple-A rated supranational entity established in 1990 to promote private enterprise in Central and Eastern Europe as well as the Commonwealth of Independent States.
Although it has yet to price, the EBRD deal has been split into two NT$2 billion tranches with maturities of five and five and a half years. The coupon on the shorter-dated piece has been set at 3.25%, while the five-and-a-half year bonds offer 3.27%, around 20 basis points below Taiwan government bonds.
The EBRD coupons were set marginally lower than the IADB's recent issue. That deal, arranged by ABN AMRO with China Securities as co-lead, featured five separate tranches of five year bonds with call options in years one, two and three. The coupons ranged from 3.30% to 3.34%, or between 10 and 15 basis points below treasuries.
A well-placed source says the deal has mostly been attracting the interest of bond funds keen to get their hands of five-year paper.
The EBRD deal offers more evidence that Taiwan's domestic debt markets have become a haven for supranational issuers this year. The IADB has issued two transactions, while other notable issuers include the Nordic Investment Bank (NIB) and the European Investment Bank (EIB).
Aside from the obvious advantage to issuers of low interest rates, local investors are also keen to get good quality triple-A paper on their books. "There have been more supranational issues this year because they can capitalize on low rates and the demand is there," explains Terry Tse, assistant manager of fixed income at Grand Cathay. "Investors have been eating up this paper because it's a quality credit and it allows them to add diversity to their portfolios."
Although Tse adds that demand for supranational paper has become particularly high at a time when investors are fearful of defaults on issues by local borrowers, he does not think supranational issuance is crowding out Taiwanese corporates.
"That is not the case at all," he says. "The demand is there for corporate and supranational paper and I would not be surprised to see a good level of activity from both sectors between now and the end of the year."
On the supranational side, the EIB has mandated China Trust to arrange its second deal of the year in October and Citibank will lead manage a transaction for the Council of Europe, also due next month.
