German development agency L-Bank has a lower profile than its bigger counterpart, KfW. But Sven Lautenschläger, who is responsible for the bank's international funding, agrees with other issuers that comparatively small size is not a problem. "Our paper has rarity value," he says. "Some investors do charge a liquidity premium but over the past few months that seems to have been changing, as people realize that more liquidity also means more volatility. Many AAA investors don't want that much volatility.
"When KfW and EIB started doing e5 billion deals, it took the market a while to see how they would trade, how they would react to events. Now the market is more mature, and investors don't want only to own just these big deals. They also need a balancing prime asset from a smaller, less volatile issue from a name like L-Bank or Cades."
So the bank will continue to focus on smaller, less super-liquid issues. "Our primary focus is building up dollar and euro yield curves, and our funding needs are only about e7 billion a year," says Lautenschläger. "If we did deals worth e3 billion, we'd only be able to add one new point to each curve per year.