BNP Paribas Home Loan SFH and Münchener Hyp took advantage of strong market conditions and demand evidenced by a HSBC SFH issue yesterday to launch well-received deals today (Wednesday), with BNP Paribas’s four times subscribed amid risk-on sentiment.

Münchener Hypothekenbank

Combined with yesterday’s Eu1.25bn 10.5 year HSBC SFH deal today’s Eu1.75bn of new issues make for the highest euro benchmark weekly volume since January as issuers across markets respond to supportive market conditions.

“All seems forgotten about Cyprus, Italian political deadlock or European growth,” said a syndicate official, citing heady demand for the HSBC SFH deal and a host of SSA deals being launched into a market characterised by risk-on sentiment.

He noted that peripheral issuers have yet to get involved in the renewed primary market activity and urged them to get on board.

“What Turkey and Mexico can do, you can do too,” he said. “The market is yours!”

Turkey sold a 30 year dollar deal yesterday and Mexico issued a Eu1.6bn 10 year deal at 120bp over mid-swaps.

Another syndicate banker suggested that a couple of other German covered bond issuers were meanwhile eyeing the market.

BNP Paribas Home Loan SFH launched a Eu1bn no-grow seven year deal this morning. Leads BNP Paribas, Commerzbank, Danske, UBS and UniCredit set initial price thoughts in the mid to high 20s, guidance at 22bp-25bp over and then fixed the re-offer spread at 22bp over.

A syndicate official at one of the leads said that the deal attracted Eu4bn of demand from around 130 investors.

“It was a very strong deal, a very rapid bookbuilding, and there was good pricing development from IPTs in the mid to high 20s to re-offer of 22bp over,” he said.

The new issue came flat to BNP Paribas’s secondary curve, he added.

The deal was supported by a positive market sentiment and a recent rally in French government bonds, he said. Also supportive was the positive outcome of a HSBC SFH deal yesterday, which proved that there was strong demand for French names, he added. However, he stressed that BNP could not benefit from the same scarcity value as HSBC since BNP is a more frequent issuer and has a fuller outstanding curve.

A syndicate banker away from the leads said the deal was a “great” result for BNP Paribas and that 22bp over was a “perfect” spread. Another saw the transaction as coming with a couple of basis points of new issue concession, and around 24bp over French government bonds, which he said had widened in a “quite meaningful” way since yesterday.

BNP Paribas Home Loan SFH’s last euro benchmark was a Eu1bn 10 year launched at 85bp over on 15 March 2012.

Münchener Hypothekenbank launched a Eu750m eight year mortgage Pfandbrief today, after the issuer had been eyeing the market for some time. Leads BayernLB, DZ Bank, HSBC, LBBW, UniCredit, and WGZ went out with initial price thoughts of the low to mid-single digits over mid-swaps area and then guidance of the 3bp over area. Around Eu900m of orders had been placed shortly before the order books were due to be closed, with the re-offer spread fixed at 3bp over.

A lead syndicate official said that some 60-plus accounts participated in the deal and that although the issuer could have opted for a smaller deal at 2bp over on balance it was the right decision not to go for tighter pricing in line of the underperformance of some previous German Pfandbriefe, in particular a Berlin Hannoversche-Hypothekenbank deal. Berlin Hyp met with lukewarm reception when it launched a sub-Libor Eu1bn five year deal at the end of January.

“There’s a couple of basis points new issue premium,” said the syndicate official about Münchener Hyp’s deal, “which I think there needs to be and the issuer appreciates that.”

In doing so the issuer was showing important market leadership, he said. A 2022 Münchener Hyp Pfandbrief was the most relevant pricing comparable, he added, and was around flat to mid-swaps.

A syndicate banker away from the leads said that the spread was “spot-on” and that he would have executed the deal in the same way the leads did.

The eight year maturity was primarily a maturity profile decision, according to the lead syndicate banker, although it also helpfully meant the deal would come in Libor positive territory, with pricing tighter than that encountering reduced investor interest.

The last deal by Münchener Hyp was a Eu500m two year public sector issue on 25 November that was priced at 20bp through mid-swaps.

Sixty-six accounts from nine countries were in the orderbook, according to the issuer. Banks took 76.2%, funds 23.5%, and central banks 0.3%. Germany was allocated 51.1%, Luxembourg 15.3%, the UK 10%, France 7.1%, Finland 6.7%, the Netherlands 5.5%, and Austria, Italy and Switzerland together 4.3%.