BNP Paribas and Svenska Handelsbanken took advantage of tighter spreads to kick off FIG activity with senior unsecured deals today (Monday), and while some bankers said there was no firm line-up in covered bonds others hinted strongly at forthcoming supply.

Stadshypotek parent Svenska Handelsbanken, Stockholm

Svenska Handelsbanken was out first this morning, launching a seven year senior deal via BNP Paribas, Handelsbanken, HSBC and RBS, with guidance set at the 60bp over area. BNP Paribas has also opened books for a self-led long five year issue that was being marketed in the high 60s over mid-swaps.

Syndicate officials had flagged this week as when FIG primary market activity would be likely to pick-up again after a quieter summer period, and one syndicate official said that BNP Paribas and Handelsbanken were “doing exactly the right thing” in hitting the market this week in anticipation of a more crowded market in late August and early September.

Several syndicate officials gave the impression that in covered bonds there was not much of an issuer line-up, although they expressed confidence that deals are possible and will come.

“I don’t feel a rush but in the next few days I’m sure we’ll see something,” said one. “Senior confirms that people can also do deals in covered.”

However, another strongly hinted that there will be new covered bond benchmarks in euros this week, mentioning two to three mandates. A national champion from the periphery was suggested as a possible new issue candidate – Banco Santander and Banco Bilbao Vizcaya Argentaria (BBVA), for example, have been absent from the benchmark covered bond market since January.

“The periphery has performed and continues to perform,” said a syndicate official.

Today’s senior unsecured transactions were launched against a positive market backdrop, and come after considerable spread tightening over the past summer weeks, according to syndicate officials, with one noting that senior unsecured spreads having shrunk considerably over the past week-and-a-half.

“The nominal differential between covered and senior is at an all-time tight,” he said, “so senior makes more sense from an efficiency standpoint.”

However, another said that a desire to avoid following the senior unsecured moves by BNP Paribas and Handelsbanken and choose covered bonds instead is a source of “hope for covered bond supply”.

Given recent volatility in rates, a new covered bond issue able to offer a bit more spread than one at the very low beta end of the spectrum might be preferable, he added.