Axa Bank Europe had the benchmark euro market to itself this (Tuesday) morning, in spite of yesterday’s supply demonstrating almost unprecedented conditions for Spanish issuers. Meanwhile, DnB Nor Boligkreditt is set to follow Swedbank Hypotek into the US market.

Swedbank Hypotek yesterday (Monday) priced a $2bn 144A deal split into fixed and floating rate tranches of $1bn each, through leads Barclays Capital, Bank of America Merrill Lynch, Deutsche Bank and HSBC. A three year FRN was priced at 45bp over three month dollar Libor and a five year fixed rate piece at 71bp over mid-swaps, equivalent to 94.95bp over Treasuries.

“They were comfortably oversubscribed with a very high quality book,” said a banker close to the deal.

Swedish and Norwegian issuers have been keen to access the dollar investor base, but, as with the euro market, are beholden to movements in basis swaps. However, Swedbank Hypotek is understood to have achieved an after-swap level 6bp-7bp inside what it could have done with a euro benchmark yesterday.

DnB Nor is returning to the US market, with a five year benchmark through Barclays Capital, Bank of America Merrill Lynch, JP Morgan and Morgan Stanley, with price guidance of the 65bp over mid-swaps area.

Axa Bank Europe SCF this morning launched its second covered bond, a Eu500m five year issue that is set to be priced at 63bp over mid-swaps this afternoon. Like the Spanish supply, guidance was moved tighter twice, although to a lesser extent, coming in from 65bp-68bp, to the 65bp area, before being tightened to the final re-offer spread on the back of a Eu1.25bn book.

The French issuer’s first deal, backed by a pool of RMBS secured on Belgian residential mortgages, was a 10 year priced at 83bp over mid-swaps in October. That was said to be at around 72bp over mid-swaps today.

The issuer mandated the deal yesterday and moved ahead at short notice to take advantage of the supportive conditions, according to a syndicate official at one of the leads. Bank of America Merrill Lynch, BNP Paribas, Crédit Agricole, HSBC, Natixis and Société Générale were joint bookrunners.

Further Spanish supply is expected after the success of issues for Banco Bilbao Vizcaya Argentaria and Banesto yesterday. The two cédulas benchmarks came around 10bp inside early guidance.

“These deals are pricing through secondaries, way through the bid side, which is a very rare scenario,” said a syndicate official involved in one of the trades. “There’s just such a great tone for the periphery.”

Banco de Sabadell, Bilbao Bizkaia Kutxa and Banco Popular are said to be among those Spanish issuers keen to tap into the tighter spreads.

BBVA’s Eu2bn four year deal – led by Barclays Capital, BBVA, Commerzbank, HSBC and UBS – was priced at 155bp over mid-swaps, compared with initial guidance of the 165bp area.

Banesto priced a Eu600m four year issue at 190bp over mid-swaps, 10bp inside initial price indications, after leads Bank of America Merrill Lynch, Crédit Agricole, Natixis and RBS built a book of more than Eu1.8bn

“We are very pleased indeed,” said Miguel Sánchez Vaquero, head of funding at Banesto. “The market was very strong yesterday and when we realised that we decided to go for it.

“Price talk at the beginning was in the range of 195bp-200bp, the first public announcement on screens was the 195bp area, and at the end when we saw the big volume in the book and no price sensitivity we decided to price at 190bp.”

Although Banesto’s last benchmark as in September, also a Eu600m issue, last Thursday it tapped a September 2015 issue for Eu175m at 197bp over mid-swaps.

“Last week we received a lot of demand for taps, so one of the reasons for this deal was to offer investors the possibility to enter into a new deal instead of tapping again and again,” said Vaquero. “When we decided to issue, it was when we saw that the BBVA deal was going very, very fast, and at the time we started to market our issue the BBVA deal was almost completed, with the book over Eu2.5bn.

“We realised that there was no question of us interfering with that deal, and that there was a strong demand from the market, enough to absorb both deals easily.”

Vaquero noted the turnaround in sentiment towards Spanish bonds.

“In the past Spain was heavily penalised, but things seem to be going much better than before and investors are reacting to that,” he said. “In the past year and into this year the government has taken several measures that have contributed to a better perception from international investors and that is also helping.

“Additionally, the spread between covered bonds in different jurisdictions is so huge that investors are again realising that there is a lot of value for Spanish cédulas issuers when you compare them with Pfandbriefe or obligations foncières, and they are taking advantage of that, and perhaps hoping that there is a new rally for the next weeks or months that they wouldn’t like to miss.”

In spite of the strong demand, Banesto did not increase the deal beyond its original targets.

“The book was above Eu1.8bn, so, yes, we had room to increase the deal, but we had decided from the beginning that it would not grow above Eu600m. We are very comfortable in terms of liquidity, so we prefer to proceed step by step, and we will come when we consider that we can find a good deal with no pressure at all.”

While Spain took 29% of the paper, Germany was allocated 37%, France 8%, the UK 8%, Asia 6%, Netherlands 5%, Italy 4%, and others the balance.