Banco Popular will price a Eu500m six year cédulas today (Monday), the longest dated Spanish issue so far this year, on the back of around Eu1bn of demand, while Aareal reopened benchmark Pfandbrief supply for the second year in a row and France’s BPCE is out with a tap.

Aareal’s issue is the third new euro benchmark from a core jurisdiction this year, after deals for Caisse de Refinancement de l’Habitat and Nordea Bank Finland, with supply so far skewed toward peripheral issuers. A six year cédulas hipotecarias for Banco Popular today is the fifth peripheral deal, and the third from Spain.

Syndicate bankers said they would expect more deals to hit the market in the near future, but did not commit to the names of possible new issuance candidates. The only euro primary market related mandate in the public pipeline is for a roadshow of a new SME structured covered bond programme for Commerzbank. The investor meetings start today. Barclays, Commerzbank, Crédit Agricole and UniCredit have the mandate.

A syndicate official said that Aareal’s deal shows that even tightly priced supply is finding takers.

“You wonder who is buying these deals, but even tight deals are finding the bid as some accounts prefer to park their money and play it safe,” he said, “but clearly the music is playing in the periphery.”

This is where accounts are playing for return, he added.

Banco Popular Español is out with a cédulas hipotecarias issue today after it last Tuesday (8 January) tapped the senior unsecured market with a Eu750m two and a half year deal at a re-offer yield of 4.125%, equivalent to around 362bp over mid-swaps. That was the first ever Spanish non-investment grade senior unsecured FIG deal – Banco Popolar is rated Ba1/BB/BB+.

Leads Banco Popular, Bank of America Merrill Lynch, Crédit Agricole, HSBC and Société Générale went out with initial price thoughts of the 280bp over mid-swaps area late this morning, at around 1145 CET. The order books were due to be closed at around 1430, with guidance at 270bp-275bp over and orders standing at around Eu1bn.

A syndicate official at one of the leads said that they opened the books late due to internal discussions at the issuer, and that the initial response was positive. The 280bp over area incorporated a “decent” new issue premium versus pricing for stronger peripheral issuers, he said.

Banco Sabadell sold a Eu1bn five year cédulas hipotecarias at 250bp over on Friday, and Bankinter a Eu500m three year at 220bp over the day before. Banco Popular’s last benchmark covered bond was a Eu600m five year re-offered at 255bp over on 21 March.

Syndicate officials away from the leads did not quibble over the level on Banco Popular’s deal, with one saying the 280bp over level was “in line with the secondary market”, with the caveat that the issuer’s outstanding 2018 was very illiquid, and flat to Spanish government bonds.

Another said that the spread looked appropriate, but that he had heard that the deal was developing somewhat slowly, and that demand would be weaker than for recent preceding peripheral transactions.

“I’m hearing that it’s going OK – that it won’t be a blow-out, but it’s going fine,” he said, attributing this to the choice of maturity rather than spread.

“The maturity is fairly long relative to where the other Spanish have come, and it’s pushing the boundaries,” he said. “I think three to five years would have been better to maximise traction and get the best pricing power.”

Aareal Bank announced the mandate for its deal on Friday, with leads BNP Paribas, Commerzbank, DZ Bank, NordLB and UniCredit moving early this morning to take indications of interest. Initial price thoughts were set at the 5bp over mid-swaps area, with the leads tightening the spread to the 3bp over area when they formally opened the order books around three-quarters of an hour later.

Around Eu1.2bn of orders were placed by roughly 80 accounts, with the leads setting the re-offer spread at 1bp over for a Eu625m deal following low price sensitivity.

Syndicate bankers away from the deal said it went well and that the level was tight, with one noting that the Pfandbrief came back of where government backed KfW would sell a five year, and flat to where FMS Wertmanagement, the German wind-down entity for former Hypo Real Estate assets, would come.

“I’m not surprised that the deal went well,” he said, “but I am surprised by the pricing – it’s super-tight.

“Aareal did the right thing. They got first mover advantage and the timing was great.”

Another said that what he understood to be a high quality and international order book will have allowed the leads to price the deal close to the issuer’s secondary market curve, in line with the pricing of recent transactions.

“Aareal went pretty well,” he said. “They closed the books quickly and tightened the spread, and I can imagine some other Germanic names will be looking at the market.”

A lead syndicate banker said that at 1bp over Aareal’s deal was coming flat to slightly inside the issuer’s secondary market curve, with an outstanding June 2017 issue trading slightly tighter than the mid-swaps, although the bond was a little bit squeezed.

Secondary market data provided by the Association of German Pfandbrief Banks puts an Aareal Eu500m 1.375% June 2017 mortgage Pfandbrief at 0.2bp over asset swap mid versus six months Euribor.

However, initial price thoughts were somewhat cautious, acknowledged the syndicate official, given that the deal was the first benchmark Pfandbrief of the year. He noted that at 4bp, the move from initial price thoughts to the re-offer spread was the smallest on any new issue so far this year, and said that the order book was very international for a Pfandbrief.

Last year Aareal reopened the benchmark Pfandbrief market with a Eu500m four year deal that was priced at 58bp over mid-swaps.

France’s BPCE SFH is tapping a Eu1bn February 2018 obligation de financement à l’habitat issue. Leads Banca IMI, Natixis, Nykredit and UniCredit are taking indications of interest on the basis of initial price thoughts of the low 30s.