CPPIB capitalizes on US inflation dip with huge bond sale

Pension plan seizes billion-dollar opportunity

CPPIB capitalizes on US inflation dip with huge bond sale

The Canada Pension Plan Investment Board (CPPIB) wasted no time in taking advantage of recent US inflation data. On Thursday, the board launched a new dollar deal, priced by bookrunners Bank of America, Barclays, BMO, CIBC, and Morgan Stanley, raising $1.5 billion with a maturity date set for July 2028, as reported by GlobalCapital.

CPPIB timed its bond sale following a slowdown in US consumer inflation in June, which experienced a year-on-year decrease to 3%. Core inflation also dipped to 4.8%, falling below the consensus of 5% and the previous month's figure of 5.3%.

The 144A/Reg bond, issued by CPPIB Capital, was priced at a yield of 4.352%, offering a 36.8 basis point premium over US Treasuries.

A banker involved in the deal assessed the fair value at 53 basis points, using CPPIB's outstanding 2027 and 2029 bonds as key benchmarks.

“We tightened from initial price thoughts at 60bp and priced $1.5bn after a $5.4bn book — it’s a huge response for this sort of name,” the banker told GlobalCapital.

“The issuer is extremely focused on having an investor base that stays with them and develops,” he added.

“They got a pretty much even allocation to the Americas, Asia and EMEA — about a third each — and about half to central banks and official institutions. It’s something that don’t necessarily see that from the other top names.”

CPPIB's deal joins the recent issuance spree that includes KfW and Japan Bank for International Cooperation (JBIC). Both KfW and JBIC experienced robust demand for their respective deals. KfW raised $4 billion with its first 10-year conventional benchmark in the currency since January 2018, attracting its largest-ever book for this tenor. Similarly, JBIC ventured into the longer-dated portion of the dollar curve, issuing a $1.5 billion five-year bond at an appealing price.