Primary market activity in benchmark covered bonds was limited to a Eu250m tap by HSH Nordbank this (Monday) morning, although Sparkasse KölnBonn announced a roadshow and Hypo Vorarlberg started one, with core issuers otherwise biding their time deciding on new deals.

HSH Nordbank increased by Eu250m a Eu500m no-grow March 2016 public sector Pfandbrief first launched on 6 March via the same leads as on the original issue – Commerzbank, DZ Bank, HSH, RBS and Société Générale.

The increase was priced at 10bp over mid-swaps and was driven by reverse enquiry, according to an official at the issuer, who said that the bank tapped into strong demand from institutional and savings bank investors in what was a quick transaction.

The underlying issue had been re-offered at 11bp over, and a syndicate official said that it was trading at around 7bp over to make for a new issue premium on the tap of around 3bp.

The official at the issuer said the pricing of the increase was in line with secondary market levels, and that there was no significant new issue concession to speak of.

Issuers are otherwise staying on the sidelines, with a mandate announcement for Germany’s Sparkasse KölnBonn the only other primary market-related news today. The issuer has mandated Deutsche Bank, DZ Bank, Helaba, LBBW and RBS to organise investor meetings, which will start next Monday (15 April) and last all week, according to a banker at one of the leads.

As previously reported by The Covered Bond Report (see here), the issuer is aiming to return to the benchmark covered bond market for the first time since 2008 in the first half of this year, and the roadshow could be followed by a benchmark mortgage Pfandbrief. The issuer last tapped the market in February 2008, with a Eu500m three year mortgage issue.

Austria’s Vorarlberger Landesbank- und Hypothekenbank (Hypo Vorarlberg), meanwhile, started a roadshow today via leads Barclays, Crédit Agricole, DZ Bank, LBBW and UniCredit.

A lead syndicate banker said that the size and the tenor of the transaction have not been decided yet, but that a deal would probably offer a bit of a premium given that it will be the bank’s inaugural benchmark covered bond. An issuance window could be open at the beginning of the next week, after the end of the one week road show, he said.

There were no signs this morning of concrete new issue projects being lined up, according to syndicate officials, who said that primary market activity remains subdued.

The last new euro benchmark covered bonds hit the market in week of 11 March, when CaixaBank, Stadshypotek and Bank of Ireland Mortgage Bank sold deals.

A syndicate official suggested that some core issuers looking at the market did not want to be the first to launch a new issue after Stadshypotek, which had to widen guidance from initial price thoughts. Another said that Pfandbrief issuers, for example, do not want to pay any significant new issue premium, while the experience of Stadshypotek’s deal will also have left lead managers feeling cautious.

“In an environment where issuers are not under pressure to issue it’s difficult to find the right timing and maturity,” he said.

Another said that the lack of supply is the result of issuers wanting to target the long end of the maturity curve at tight levels.

“But this does not fit with attracting investors,” he said.

A syndicate banker away from the Sparkasse KölnBonn roadshow mandate said that the issuer may be willing to come to market with a premium specific to the issuer and to an inaugural deal to make a transaction attractive in the prevailing low yield environment.

Investors could be interested in a Sparkasse KölnBonn transaction to diversify their portfolios, he added, noting that he sees the issuer as closer to German Landesbanks than German national champions.

“Yes, the issue is triple rated, but investors will also look at the bank performance, and its business model,” he said.