BNP Paribas Home Loan SFH this (Thursday) morning launched its first euro benchmark covered bond since July 2011, a Eu1bn 10 year no-grow deal, with syndicate officials saying that strong market conditions and a capped deal size had enabled tight pricing.

Leads ABN Amro, BNP Paribas, Commerzbank, and Natixis went out with initial price thoughts of the low 90s before revising guidance to 85bp-90bp over mid-swaps, and finally fixing the spread at 85bp.

A BNP Paribas branch

Orders stood in excess of Eu4.5bn with about 160-170 accounts participating by the time the order books were closed at 1045 CET, according to a syndicate official at one of the leads.

A banker away from the leads put an outstanding July 2021 issued by BNP Paribas at 79bp over.

“There’s hardly any new issue premium,” he said. “But covered bonds have been performing really well.

“We also saw DNB at a very nice level,” he added.

DNB Boligkreditt came to the market on Tuesday with a Eu2bn 10 year at 61bp over.

“BNP looks relatively aggressively priced facilitated by the market,” said a syndicate official away from the leads. “The market backdrop is very strong, so that’s what facilitates this aggressive pricing.”

Another banker away from the deal said anything would work against the current market backdrop, noting US equities were at a four year high and broader markets looked very constructive, with another noting that there is a strong bid for the 10 year part of the curve.

A syndicate official away from the leads said, before official guidance was released, that he assumed the deal would price tighter than 90bp over.

“It being a no-grow transaction is an advantage to it getting tighter pricing,” he said.

“A 10 year is more favourable now because we have an improvement of the 10 year swap by about 14bp compared to Monday or Tuesday,” he added.

A syndicate banker away from the deal also said the no-grow added to the scarcity value.

“Scarcity will play a key role in pricing,” he said.

He said that while every deal is working in the market, many issuers are waiting for spreads to tighten even further before launching transactions.

Syndicate officials were unsure of the pipeline, with one querying the status of Yorkshire Building Society, which was on a roadshow with HSBC early this month after releasing its 2011 financial results.

Another said other Scandinavian issuers were looking on the back of successful DNB Boligkreditt and Stadshypotek transactions (see separate article for more on the Swedish issue).

“I think there are some strong candidates out of Sweden,” he said. “But I don’t think Nordea Hypotek will come this week considering Nordea did a US dollar senior unsecured yesterday.”

Nordea sold $2.75bn of senior unsecured paper through a three year at 180bp over Treasuries and a five year at 210bp over Treasuries. A syndicate official put the euro equivalent spreads at 84bp over mid-swaps and 128bp over, respectively.