January 28, 2023

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Sustainable, in US dollars and at a fixed price

The International Development Fund of the Organization of the Petroleum Exporting Countries (OPEC) has returned from its first bond issuance in its 47-year history. On Friday, the agency announced that it had raised $1 billion through a sustainable bonds. The order has been raised for 3 years, which offers a constant gross annual coupon of 4.50%. 62% of the requests came from central banks and other official institutions, 19% from banks, 9% from asset managers, and 8% from pension funds and insurance companies. For geographic origin, 52% of applications came from Europe, the Middle East, and Africa (EMEA), 27% from Asia Pacific, and 21% from North America. Crédit Agricole acted as the sole sustainability advisor.

This is a sustainable bond, as the proceeds from the collection will go towards financing initiatives to support the development of countries other than OPEC. They relate to food security, health, education, infrastructure, employment and renewable energy. In this regard, it should be noted that the fund has so far allocated 23 billion to 125 countries with sustainable projects at a total cost of 190 billion.

Emphasizing that the sustainable bond was a success, Martin Mills Hansen, Head of Finance, announced that from now on there would be one issuance per year and that it would cover the entire maturity curve. The bond is said to be issued in US dollars only. Opportunistically, he explains that the fund will be able to consider financing itself in individual markets based on financial conditions. Ergo, potential issues with other currencies.

Solid sustainable bonds, exchange rate risk

OPEC is The oil cartel Born in 1960, it has 13 members today. The de facto leader is Saudi Arabia. Its International Development Fund was born in 1976.

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To date, it is the only one in the world that provides assistance only to non-member states. Until a few days ago, he had not issued any bond before the sustainable bond. top i Ratings: AA with a positive outlook for the S&P and AA + with a stable outlook for Fitch. In practice, the two agencies allocate the entity’s debt to third and second place, respectively, on the scale.

It is not hard to believe that the exchange rate risk very low. Member states, including Saudi Arabia, are guaranteed a $620 billion sovereign wealth fund, among the largest in the world. The sustainable bond offers a premium of just 75 basis points, or 0.75%, over a three-year Treasury note. The 3-year BTp yield is currently around 3.05%. The difference, however, is exchange rate risk. the Euro dollar exchange It has been appreciated in recent weeks. The euro has recovered from its lowest levels since 2002, which it reached in the fall. Since then, it has gained nearly 14% against the dollar. This explains why the issue yields 2% more than the 3-year item.

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