Nordea Bank Finland returned to the covered bond market after a nine month absence today (Tuesday) with a Eu1.25bn seven year deal that came inside the issuer’s curve after being twice subscribed, with the tight pricing seen as justified by strong technicals and a robust market.

Leads Deutsche, HSBC, Nordea and Société Générale gathered around Eu2.5bn of orders for the Eu1.25bn seven year trade, and will price the deal at 16bp over mid-swaps. This follows guidance of the 17bp over area and initial price thoughts of the high teens.

“The deal went very well, very rapidly,” said a lead syndicate banker. “The issuer wanted to take advantage of a good market.”

Some 110 investors participated in the transaction, according to the lead syndicate banker, who said that, at 16bp over, the deal was coming slightly inside the issuer’s secondary market curve, by 1bp-2bp. A Nordea Bank Finland May 2019 issue was at around 15bp over on an I-spread basis and February 2021s in the low 20s, he added, with an interpolated secondary market curve putting a seven year at 17bp-18bp over mid-swaps.

A syndicate banker away from the leads said that the lack of a new issue premium was appropriate given limited covered bond issuance by Nordea in the past 12 months. Nordea Bank Finland’s last benchmark euro issue dates back to 25 April 2012, when the issuer hit the market with a Eu1.5bn seven year deal that attracted around Eu3.2bn of orders.

Another syndicate banker away from the leads said that today’s deal was “priced to perfection” – he had also shown the issuer 16bp over.

“It was very well executed, and the correct outcome,” he said. “The deal was always going to go well, but they went about it the right way in terms of pricing.”

The market was said to be “a touch softer” this morning, but remained supported by strong technicals.

Another syndicate banker away from the leads said that Nordea’s deal was priced aggressively, and that this was made possible by factors such as high redemptions, in particular in Pfandbriefe, and a lack of supply.

“But it worked and shows demand is there,” he said. “It’s clearly an issuer’s market.”

Nordea’s deal is only the third euro benchmark covered bond of the year, a far cry from the number of deals that had hit the market by this time last year.

However, a syndicate banker away from the leads said that Nordea had executed a “very healthy transaction” and that the deal demonstrated the strength of the covered bond market.

“The covered bond market continues to show that it is extremely strong,” he said, “and we are continuing to see a low beta bid extended out to longer dated, such as seven years.”

The FIG market is busier away from covered bonds, with issuers such as BPCE, Banco Espírito Santo and Banco Popular Español tapping the euro senior unsecured market with floating rate and fixed rate deals today after a host of senior deals across the euro, US dollar, and sterling market yesterday (Monday).

The only publicly announced covered bond mandate in the pipeline is for a roadshow of a new Commerzbank SME backed structured programme. The issuer yesterday announced that it has mandated Barclays, Commerzbank, Crédit Agricole and UniCredit to arrange a series of investor meetings starting next Monday (14 January).