Storebrand Boligkreditt is planning a Eu250m issue that would mark its return to the euro market after a lengthy absence and Hungary’s OTP Mortgage Bank today (Thursday) priced a Eu510m March 2015 FRN, as bankers look forward to a pick-up of benchmark supply next week.

OTP Mortgage Bank priced a March 2015 issue at 400bp over three month Euribor, in line with guidance, after increasing it from the Eu500m at which it was initially marketed. BNP Paribas is the sole lead. The bonds are rated Baa3 by Moody’s.

Storebrand Bank

OTP last came to the euro market in November, with a Eu750m two year issue that was priced at 525bp over Euribor, which followed a Eu750m three year floating rate note issue in August 2011, re-offered at 300bp over three month Euribor. [Updated.]

Norwegian issuer Storebrand yesterday (Wednesday) publicly announced a mandate for the deal, awarded to Commerzbank, Danske Bank and DNB, with the leads in conversation with investors before finalising the details of the transaction. A seven year or long five year maturity is said to be preferred, with a choice yet to have been made between fixed rate and floating rate formats.

A syndicate official at one of the leads said that for asset-liability management and other reasons the issuer did not opt for a benchmark-sized deal. The euro market does not offer arbitrage at the moment, he added, with the euro–Norwegian krone basis swap slightly disadvantageous.

He referred to the Norwegian issuer as being one of the “finest”, and said that the deal would likely come with a pick-up over transactions from Storebrand’s more globally oriented Nordic peers.

Fellow Norwegian covered bond issuer SpareBank 1 Boligkreditt last Monday (20 August) sold a Eu1bn five and a half year deal at 17bp over mid-swaps as spreads on core paper tightened towards pre-crisis levels.

Another syndicate banker suggested that diversification would be the main attraction for Storebrand given the strength of the bid in the domestic market, and said that the deal represents rarity value is and is likely to be well received.

A deal from Storebrand could be one of several covered bonds next week, with syndicate officials expecting issuance activity to pick up. Austria’s Raiffeisenlandesbank Niederösterreich-Wien (RLB-NÖ) is on a roadshow ahead of its inaugural euro benchmark, and other issuers are said to be eyeing the market.

BayernLB, Crédit Agricole, DZ Bank, HSBC, and UniCredit have the mandate for RLB-NÖ’s deal, which a syndicate banker at one of the leads said will probably be pitched as a Eu500m minimum issue, with a preference for a longer maturity emerging from the roadshow.

“RLB is pretty certain for next week,” he said, “and it probably will not be alone. Another Scandi benchmark after SpareBank 1’s issue is rumoured, and I wouldn’t rule out other countries.

“Things will pick up next week, although I don’t think we will be overwhelmed.”

Any new issuance will likely be concentrated on the first three days of next week, according to syndicate bankers, before a keenly anticipated European Central Bank governing council meeting and press conference on Thursday, in the lead-up to which market participants are assessing the likelihood of ECB president Mario Draghi providing further information about a sovereign bond buying programme.

A syndicate official warned against expecting too much from the press conference, while another said that the issuance window should remain open thereafter bar any negative surprises.

There were no new euro covered bonds this week, but according to syndicate bankers the euro covered bond market is in good shape, with spreads at very tight levels. This, said one, may mean that the potential for deals to be priced with negative new issue premiums has been exhausted, but raises the prospect of the first sub-Euribor re-offer spreads since before the crisis.

Another syndicate banker said that he could imagine tight spreads could entice a German issuer to come to market soon, and said it would be time for a deal to come through mid-swaps.

According to NordLB covered bond analysts citing iBoxx Euro Covered data, covered bonds in five out of 19 markets are trading at spreads tighter than 11bp over mid-swaps: Sweden (-7bp), Germany (-4bp), Switzerland (1bp), Norway (6bp), and Finland (10bp). Thirteen further markets feature spreads below 50bp over mid-swaps, with only spreads in the peripheral markets of Italy, Ireland, Portugal and Spain trading wider than 100bp over.