Three issuers that had lined up euro benchmark covered bonds yesterday (Monday) afternoon followed up by launching sub-jumbo deals today despite the market being weaker, with an Aareal Bank issue the most in demand and a Deutsche Hypo deal the tightest.

Benchmark covered bond supply remains restricted to core jurisdictions, with Aareal Bank and Deutsche Hypothekenbank continuing the Pfandbrief theme that has dominated benchmark primary market activity in recent weeks and Terra BoligKreditt following DNB Boligkreditt into the market a day after its Norwegian peer.

The transactions follow a busy day for new issuance across asset classes yesterday (Monday), with Eu5bn of euro corporate supply and the highest intra-day FIG supply (Eu4bn) since 2 February, although market conditions quickly turned volatile and deteriorated into the close, according to syndicate officials.

Spanish 10 year bonds, for example, opened as much as 20bp tighter but closed 30bp wider, above 6.5%, while Bunds were down 80 ticks at the open but closed 25 ticks higher.

“The market is definitively weaker,” said a syndicate banker this morning, “and it’s markedly quieter across asset classes.”

Another syndicate official said that although yesterday’s issuance window enabled a slew of corporate and financial issuance that window “could be measured in hours, not days” and that this could be seen today.  However, he said that the weaker conditions would not likely have put off the covered bond issuers in the market today even if their deals had not already been under preparation yesterday given their appeal as safe haven offerings.

And a covered bond banker away from today’s deals said that the weaker market had not been an obstacle to the new issues being successfully executed.

“If you look at indices, they are not as great, but the deals are getting done,” he said. “Everything that has surfaced since yesterday morning has been well absorbed, which is encouraging ahead of the Greek elections.

“It shows that investors are cash rich and ready to put money into deals where issuers are paying a fair level.”

Aareal Bank attracted the most demand, with leads Deutsche Bank, DZ Bank, HSBC, LBBW, and WGZ gathering some Eu1.2bn of orders, pre-reconcilation, from some 70 accounts. They will price a Eu500m five year deal at 20bp over mid-swaps, the tight end of guidance of 20bp-22bp, revised from the 23bp over area. This in turn followed initial price thoughts of the mid 20s from yesterday afternoon.

Deutsche Hypothekenbank has set the reoffer spread on a Eu500m five year issue, like Aareal’s a mortgage Pfandbrief, at 9bp over, the tight end of guidance of the 10bp over area. This followed initial guidance of 10bp-12bp, after initial price thoughts were set at the low teens yesterday. Barclays, BayernLB, Commerzbank, Deutsche Bank and NordLB are lead managers, and gathered more than Eu800m of orders.

A syndicate banker away from the leads said it is impressive how much demand there was for these deals amid deteriorating conditions, although Terra’s went slower than he would have expected given how well flagged it had been.

Another syndicate official away from Terra’s transaction said it seemed to be going well, and that it looked like it, like DNB’s, would be priced flat to secondaries.

More than Eu700m of orders were placed for a Terra Eu500m minimum seven year issue and leads Commerzbank, Nordea, UBS and UniCredit will price a Eu650m deal at 55bp over, which follows guidance of the mid to high 50s. DNB Boligkreditt yesterday sold a Eu1.5bn seven year at 40bp over. (See separate article here.)

Yet more German supply could be forthcoming, said a syndicate banker, with Helaba a candidate for a new issue.