The primary market for covered bonds was quiet this morning after Stadshypotek and UniCredit Bank Austria wrapped up new benchmarks yesterday (Wednesday) that, coming on top of a Eu2bn BPCE issue on Tuesday, demonstrated a strong rebound in sentiment after a holiday-prompted hiatus.

The Swedish issuer, a subsidiary of Svenska Handelsbanken, was about to size its deal at Eu1.5bn after leads Deutsche Bank, Goldman Sachs, Handelsbanken, HSBC and UBS built a book of Eu1.8bn. The issuer was able to price the issue at 31bp over mid-swaps, following guidance of the 32bp area.

Stadshypotek parent, Svenska Handelsbanken, Stockholm

“At a level of 31bp for Eu1.5bn in five years, this is one of the strongest deals of the year,” said Edward Markham, syndicate manager at Goldman Sachs.

“The central bank participation and Asian participation were notable,” he added. “The issuer has been doing a lot of roadshow work in the region and that clearly paid off.”

Asian investors (non-Japan) took 26% of the paper and central banks and SSAs had a 34% share. Germany and Austria were allocated 38%, the UK 14%, Scandinavia 13%, France 3%, the Benelux 2%, southern Europe 2%, and others 2%. Banks took 48%, managed funds 13% and others 5%.

With the exception of a Eu2bn BPCE on Tuesday, there had been no new benchmark covered bonds in the fortnight before Stadshypotek and UniCredit Bank Austria launched their deals yesterday.

“Given the break in issuance, there was clearly a lot of cash to put to work, and the issuer was one of the first to benefit,” said Markham. “Also, there was little competing issuance, either in covered bonds or SSA paper, while next week is expected to see significant supply.

“There has been some volatility, with Portugal and Spain, but there was a nice backdrop that made this a good window for the strongest jurisdictions, including Scandinavia.”

The pricing compared with an old Stadshypotek five year issue trading at around 29bp over when the new issue was announced, although other Scandinavian comparables were trading in the low 30s over. A syndicate official at one of the leads said that the new issue therefore came roughly flat to fair value.

UniCredit Bank Austria priced its Eu1bn three year issue at 38bp over mid-swaps yesterday and the deal performed strongly in the aftermarket, tightening to around 33bp over today. Leads Crédit Agricole, Commerzbank, Erste, ING and UniCredit built a book of Eu2.2bn after having gone out with guidance of 40bp area.

Germany was allocated 33% of the paper, Austria 11%, the Benelux 12%, Asia 11%, Nordics 9%, the UK and Ireland 8%, central and eastern Europe 7%, Italy 3%, France 2%, Switzerland 2%, and others 2%. Banks took 43%, funds 25%, central banks 24%, insurance companies 6%, corporates 1%, and others 1%.

A 2025 Crédit Agricole Home Loan SFH issue was increased by Eu250m yesterday by Crédit Agricole. The size was capped at Eu250m from the outset and the lead built a book of just under Eu500m at guidance of the 65bp area, before pricing the tap at 63bp.

“There is ongoing demand for long dated French names,” said a syndicate official at the bank, “and with the Bund down yesterday morning it was a good time to increase this.”