ING-DiBa and possibly Yorkshire Building Society are considered candidates for issuance next week after the end of roadshows, but syndicate officials expect other issuers to hold off while the market continues to rally. Meanwhile, demand for a Credit Suisse deal hit $5.4bn.

A Eu1.5bn seven year Société Générale SFH deal and a Eu1.75bn 12 year Caisse de Refinancement de l’Habitat issue were the only new benchmarks in euros this week in a market that was otherwise calm except for a Eu250m ANZ National tap – although the dollar market enjoyed $3.5bn of supply from Caisse Centrale Desjardins du Quebec and Credit Suisse (see below for more).

“The market is very bullish and a lack of supply is pushing spreads tighter,” said a syndicate official in London. “Issuers might decide to wait for spreads to tighten even more.

“I think we will continue to see the same steady flow of transactions – a couple each week.”

Another syndicate official said that he expects the next big round of issuance to occur once spread tightening comes to a standstill.

“When there is a peak, we will see them jump in,” he said. “But this could take a while.”

ING-Diba, Frankfurt

Market participants said ING-DiBa was the most likely candidate for issuance next week as it was finishing a roadshow in Copenhagen this (Friday) afternoon with leads BNP Paribas, Commerzbank, LBBW and ING.

A syndicate official at one of the leads said investor feedback has been very positive, providing the issuer with the confidence to launch a covered bond early next week.

“We will most likely come to the market next week, if nothing of immediate urgency happens in the market,” he said.

He added that the maturity would be between five and 10 years, but said it had not been determined yet.

A syndicate official away from the leads said he would not expect a longer dated issue, because ING-DiBa would not be able to offer an attractive yield to investors in the long end.

“I’m pretty sure it will be a five year,” he said. “It did a five year last year and that went quite well.”

ING-DiBa launched its debut benchmark covered bond in June last year, a Eu500m five year at 14bp over. The syndicate official said that deal is now trading in the high teens. He said a new five year should come around the 20bp over area to the low 20s.

Yorkshire Building Society also finished a week long roadshow in continental Europe and the UK today with lead manager HSBC.

“If I were them, I’d go for the sterling trade because of the cost of doing a swap,” said a syndicate official away from the leads. “But then again the euro market is red hot, so it might be tempting for them to take advantage of that and do a sterling transaction another day.

“The sterling investor base is relatively loyal,” he added.

A syndicate official at Société Générale said SG SFH’s Eu1.5bn seven year transaction yesterday (Thursday) had gone very well despite comments from bankers not involved in the deal that initial guidance of the 120bp over mid-swaps area had been unnecessarily wide. Leads Banca IMI, Barclays Capital, Danske Bank, Deutsche Bank, Natixis and SG ultimately re-offered the paper at 107bp over.

“The final result is inside secondaries,” he said. “I cannot remember that ever having happened on a covered bond before.”

He put the initial starting point of 120bp over at 10bp over the SG SCF curve and 5bp-7bp against the theoretical SG SFH curve.

“Recent new issue premiums on covered bonds have been in the context of 15bp so the starting point was on the tight side versus recent trades,” he said. “To be honest, this smacks to me of people just having a look at the book and assuming it was too cheap without realising the realities of the market we’re in as of today.”

A banker at another of the leads said that the deal had performed well since pricing at the tighter level, wiht bids continuing to come in. He added that, after having widened on the back of the initial guidance, SG’s curve had come back in when the final re-offer was announced.

Germany and Austria were allocated 33% of the deal, France 23%, the UK 17%, southern Europe 8%, the Benelux 8%, Nordics 6%, and others 5%. Asset managers took 54%, banks 22%, insurance companies and pension funds 18%, central banks and SSAs 5%, and others 1%.

Credit Suisse printed a $2bn three year covered bond yesterday on the back of a $5.4bn book. Leads Credit Suisse, Bank of America Merrill Lynch, RBC and SG closed the books at 1400 London time with 160 orders.

“We were still batting away orders even after the book closed,” said a syndicate official at one of the leads. “The quality of the book was phenomenal,” he said.

The US and Canada took 55%, Switzerland 15%, Asia 9%, the UK and Ireland 8%, Germany and Austria 3%, other Europe 2%, and Middle East 1%. Asset managers were allocated 56%, banks 19%, retail and private banks 9%, insurance companies and pension funds 9%, central banks and official institutions 6%, and other 2%.