UniCredit Bank Austria met with solid demand for a Eu500m no-grow seven year Pfandbrief today (Tuesday) despite coming a day after its parent sold a Tier 2 deal, noted a lead banker, while RBC is pricing its second euro issue since July, a Eu1.5bn five year.

The deals form part of a flurry of activity in the public bond markets today amid supportive issuance conditions and ahead of the release of US non-farm payrolls this afternoon. In euros, for example, Intesa Sanpaolo is tapping the senior unsecured market and the European Financial Stability Facility (EFSF) is also out with a deal.

Royal Bank of Canada opened order books for a five year covered bond, its fifth foray into the benchmark covered bond markets since it registered a new programme in accordance with Canada’s new covered bond legal framework in early July. It inaugurated the programme with a US dollar deal before tapping euros, Australian dollars and then the US market again.

A syndicate official at one of the leads – Barclays, Commerzbank, ING, RBC, and Société Générale – said that an upcoming blackout period for the issuer and good market conditions were some of the reasons behind the timing of the deal.

The leads are pricing Eu1.5bn at 5bp over mid-swaps for the issuer. They went out with initial price thoughts of the high single-digits over mid-swaps this morning before setting guidance at 5bp-7bp over. An investor welcomed the addition of a “will price in range” commitment.

Indications of interest exceeded Eu1.6bn. An update on the order book was not available at the time of publication.

The lead syndicate official said that at 5bp over, RBC’s deal would be priced without a new issue premium. The issuer priced a Eu2bn seven year at 16bp over on 25 July, and that was trading at 12bp over mid before the new deal’s announcement, he said.

A syndicate banker away from the leads saw the August 2020s around 2bp tighter than where they were re-offered, but said that he had also been pricing Canadian supply at 5bp over in five years.

Bank Austria tucks in behind parent T2

UniCredit Bank Austria is pricing a Eu500m no-grow seven year Pfandbrief today and a lead syndicate official said that good demand for the covered bond despite it coming the day after a Tier 2 for its parent shows improved line availability for the UniCredit name.

UniCredit SpA launched a Eu1bn 12 year non-call seven year Tier 2 issue yesterday on the back of more than Eu3.5bn of demand pre-reconciliation. The deal paved the way for Bank Austria to enter the market with its covered bond today, and leads Danske, JP Morgan, LBBW, Natixis and UniCredit will price a seven year public sector Pfandbrief at 25bp over mid-swaps after building an order book of Eu1.3bn.

The transaction was initially marketed in the high 20s over, which generated indications of interest in excess of Eu750m. Guidance was then set at 25bp-27bp over. Nearly 100 accounts are said to have participated.

A syndicate official on the deal said that the leads took a slightly cautious approach to the deal given that yesterday’s Tier 2 for the issuer’s parent will have already used up some of investors’ credit lines for the UniCredit group, but that demand for the Pfandbrief was still strong and that this showed investors had a more positive outlook on the credit compared with a few years ago.

“It looks like there is more money available for the UniCredit name,” he said.

A syndicate banker away from the leads said that at 25bp over, Bank Austria’s deal was coming flat to marginally wide of secondary levels, putting April 2019s at 17bp-18bp over, for example.

A syndicate official on the deal put the new issue premium at around 2bp over, and said that the leads looked to the issuer’s national peer group for relative value references.

Today’s deal is the fourth Austrian new benchmark covered bond this autumn, with Kommunalkredit Austria, Raiffeisenlandesbank Niederösterreich-Wien (RLB NOe-Wien), and HYPO NOE Gruppe Bank each having priced new issues since the middle of September.

A Eu500m seven year RLB NOe-Wien deal that was re-offered at 10bp over is trading at around 9bp over mid, according to the lead syndicate banker, and a Eu500m seven year HYPO NOE issue that was launched at 13bp over two weeks ago is at 12bp over. An Erste Group Bank deal that was also cited was at 12bp over.

Bid to bid, this puts Bank Austria’s new issue some 10bp back of HYPO NOE and Erste Bank, and a little bit more versus RLB NOe-Wien, noted the syndicate official.