The Covered Bond Report

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Helaba, SpaBol steady ship with measured benchmarks

Landesbank Hessen-Thüringen and SpareBank 1 Boligkreditt put the euro covered bond market on a steadier footing today (Tuesday) by opening this week’s supply with successful €750m and €1bn trades, respectively, in sub-five year tenors.

The two euro benchmarks come after BNP Paribas Fortis on Friday, in the eyes of several syndicate bankers, pushed the size-price envelope with a €1bn five year benchmark that was tightened 3bp to a 32bp re-offer and sized at a yard despite being only marginally oversubscribed, with the book “above €1bn”. A banker involved in today’s supply said brokers had quoted the Belgian deal as much as 6bp wider.

“Yesterday (Monday) evening it was recovering a bit,” he added, “up to 35bp on the bid side, so we got the indication that the market is a bit more receptive.”

Landesbank Hessen-Thüringen (Helaba) leads ABN Amro, DZ, Erste, Helaba, Santander and Scotiabank open books this morning with guidance of the plus 18bp area for the euro benchmark-sized August 2027 public sector Pfandbrief, expected ratings triple-A. After around two hours and 10 minutes, they reported book above €750m, including €55m of joint lead manager interest, and after around two hours and 50 minutes, they revised guidance to 16bp+/-1bp, will price in range, on the back of books above €1bn, excluding JLM interest. The size was then set at €750m and the spread at 15bp on the back of books above €1bn, excluding JLMs, and the final allocatable book was €952m, including €50m of JLM interest.

A lead banker said the issuer had prioritised price over size, being keen to reach €1bn but content to issue less, with a view to pricing closer to a €500m 3.5 year public sector Pfandbrief issued by LBBW at 11bp on Monday of last week (16 October).

“It was a rock solid trade,” he added. “A lot of investors were involved, but with smaller sizes than in other times.”

He put fair value at around 10bp, implying a concession of 8bp at initial guidance and a final new issue premium of 5bp. Pre-announcement comparables circulated by the leads included Helaba €1.25bn 0.01% July 2027 mortgage Pfandbriefe and €1bn 3.375% January 2028 public sector Pfandbriefe both at i-spreads of 10bp, while LBBW’s 3.5% April 2027 public sector Pfandbrief of last week was seen at 10bp and its 3.25% September 2027 green Pfandbriefe at 9bp.

SpareBank 1 Boligkreditt (SpaBol) leads Crédit Agricole, DZ, Natixis and Santander meanwhile opened books with guidance of the mid-swaps plus 40bp area for the euro benchmark-sized July 2028 Norwegian issue, expected rating Aaa. After around an hour and 10 minutes, they reported books above €1bn, excluding JLM interest, and after around two-and-a-half hours, they revised guidance to 37bp+/-1bp, will price in range, for an expected €750m size on the back of books above €1.3bn. Final terms of €1bn at 36bp were set on the back of a book over €1.6bn, excluding JLM interest and pre-reconciliation, and the final book good at re-offer was above €1.5bn, excluding JLMs.

“This was a bit better than the Helaba,” said a banker away from both trades. “The starting spread of 40bp was really juicy and 36bp for a triple-A Norwegian name is nice.”

A syndicate banker at one of the leads said the issuer had been targeting a €1bn size and was pleased to have been able to achieve that.

He put the new issue premium at around 7bp, based on fair value of 28bp-29bp over. Pre-announcement comparables circulated by the leads included SpaBol 3% May 2030s at an i-spread of 36bp, while among recent issuance Nordea Mortgage Bank 3.625% October 2028s were at 26bp, Crédit Agricole Home Loan SFH 3.375% September 2028s at 30bp, and BPCE SFH 3.375% March 2029s at 32bp.

The 3.8 and 4.75 year deals reaffirmed the euro benchmark market’s concentration in maturities of five years and shorter, with Pfandbriefe issuers staying closer to three years.

“Issuers are not willing to pay the higher spreads for the longer maturities,” said a syndicate banker, “even if that would be quite normal.”

Another banker suggested that today’s two deals could be the totality of this week’s euro benchmark supply, with no mandates visible in the pipeline and the outcome of the latest European Central Bank governing council meeting due on Thursday.