DNB Boligkreditt will today (Wednesday) become the first issuer to have priced four euro benchmark covered bonds this year, having launched what a lead syndicate official said was an opportunistic 10 year deal that takes advantage of improved relative value versus a rich agency segment.

Unusually for the Norwegian issuer the deal will not exceed Eu1bn, with all previous DNB euro benchmarks having been sized at Eu1.25bn or more.

“In the context of what DNB normally does and their policy so far I take note of that,” said a syndicate official away from the deal.

Leads Deutsche Bank, Natixis, Nomura and UniCredit built an order book of around Eu1.6bn for the deal on the basis of guidance of the low to mid-30s over mid-swaps, in line with initial price thoughts, and will price the transaction at 33bp over.

One syndicate banker away from the leads said the level was a touch too tight in his view, but said that the timing of the deal was good.

“Why wait until January when the market is good and technicals are supportive?” he said. “I can’t knock it.”

Another said the pricing was in line, neither a giveaway but tight enough, and that the deal would just about offer the 2% yield that was needed to attract some insurance companies, but with pricing inside the French government bond curve likely to put off French investors.

“The French bid already wasn’t that strong in CFF’s deal,” he added.

France’s Compagnie de Financement Foncier on Friday sold a Eu1bn no-grow 10 year obligations foncières issue that was the first 10 year euro benchmark since a Eu500m deal from RLB NOe-Wien at the beginning of September and only the second such deal since early July.

A lead syndicate banker said that the issuer was not focussed on deal size, and that timing was the essence of the trade. By coming to market at this particular moment the issuer was anticipating market participants gradually stopping business for the year and potentially more challenging issuance conditions in January, when higher new issue premiums may be necessary, he said.

“It’s fairly opportunistic,” he said. “It was felt that a fair amount of investors are desperate for supply and that relative value in this segment and on this issuer is attractive now compared with a rich agency segment.”

While a DNB March 2022 covered bond has only tightened by around 5bp maximum since the beginning of October, he said, agency spreads and French and UK covered bond spreads have tightened some 15bp-20bp in the past four to six weeks.

A Eu3bn 10 year European Investment Bank benchmark, a Euro Area Reference Note (EARN), came at 49bp over mid-swaps in September and has tightened to around 20bp over, he noted.

He put DNB’s March 2022s at around 28bp over mid, and said that at 33bp over the re-offer spread on its new deal incorporated a new issue concession of around 3bp versus secondary market bid levels.

He acknowledged that pricing of some 10bp inside OATs discouraged French demand.

“French accounts are very comfortable with the name and the maturity, but 10bp through is too much,” he said. “If OATs perform investors may get involved in the secondary market.”