Belfius was the only FIG issuer in euros this (Tuesday) morning, with a Eu500m five year covered bond that a lead banker said came with a new issue premium of 1bp-2bp but others saw priced more attractively. Kommunalkredit Austria is planning a deal-related roadshow.

The Austrian issuer today announced the mandate for a euro public sector benchmark covered bond to be launched after a series of investor meetings scheduled for the end of January/early February. HSBC, LBBW, Natixis, Raiffeisenbank International and UniCredit have been hired as lead managers.

The announcement comes after Kommunalkredit Austria (KA) in September sold its first euro benchmark covered bond since February 2011, with the issuer intending to tap the market on a regular basis to refinance redemptions.

An official at KA today told The Covered Bond Report that this month’s roadshow is targeted at investors the issuer was not able to meet when it last conducted a series of meetings, and that the issuer has two issues maturing in February, a Eu860m euro issue and a Sfr490m (Eu396m) issue.

Belgium’s Belfius Bank was out with the first FIG euro transaction of the week this morning, a Eu500m five year mortgage-backed covered bond that will be priced at 13bp over mid-swaps.

Syndicate bankers said that the market had been in need of a slowdown in primary market activity after heavy supply in the first two weeks of the year, with blackout periods ahead of earnings announcements partly also explaining the lack of new issuance.

“It feels like the market is having a bit of a breather, which was needed,” said one. “Now we’re seeing levels coming in again and we’re well poised for anyone wanting to take advantage of a good window.”

Another said that a good number of peripheral issuers are on the sidelines waiting for further evidence of momentum in the market before pursuing new transactions.

On Belfius, leads Bank of America Merrill Lynch, Belfius, Crédit Agricole, Commerzbank and Nordea built an order book of around Eu750m for the new, Eu500m no-grow issue, which they initially marketed in the mid-teens over before setting guidance at 13bp-15bp over (will price in range).

A syndicate banker on the deal said that fair value was 11bp-12bp over, with the deal therefore having offered a new issue premium of 1bp-2bp.

The fair value assessment chimed with that given by some syndicate officials yesterday, when the deal mandate was announced. This morning one syndicate official away from the leads said the pricing was aggressive, with the deal coming flat to secondaries, while others said the spread was attractive.

One put the new issue premium at around 5bp, based on November 2017s in the mid-single digits and June 2020s at around 15bp over.

Another said that, at 13bp over, Belfius’ deal looks generous but that the leads took the right approach, with core European issuers needing to offer more of new issue concession to “reinvigorate” the investor base after recent deals have failed to perform.

“Belfius did the right thing,” he said. “I think it will trade 1bp-2bp tighter and add a more positive tone to the next batch of deals.”

He noted that Belfius’s curve widened a little bit after the spread on its new issue was announced.

The other syndicate official away from the leads said that the new issue concession was sizeable, but that other issuers, such as Nordea Bank Finland, paid similar premiums this year.

“It’s tough to get investors excited at these tight levels,” he said. “In senior, core names also struggle to get people jumping up and down.”