Covered bond issuance is forging ahead with three more euro deals today (Thursday) and the exclusively core supply – from CBA, Credit Suisse and Sparebanken Vest – met with a sturdy response that a banker said was positive given tight spreads and high volumes.

Credit Suisse, Zurich

Six euro benchmark covered bonds totalling Eu5.75bn had already been sold this week, including the first from the periphery yesterday (Wednesday), before the latest round of issuance today, with plenty of activity in the senior unsecured markets and the first capital deals and mandates of the year also hitting screens.

UniCredit analysts said covered bond issuance levels are a return to the “old ‘January supply wave’” that more recently had not materialised as it traditionally had, although a syndicate banker said that FIG activity overall so far this year is not materially different from 2013.

“Some already call it a frenzy of supply, but probably are just not used to the busy times anymore and forget,” he said. “In reality we are exactly at the same volume of Eu14.25bn across senior and covered bonds like 12 month ago – the difference is the split.

“Back than we had fewer covered bonds, today we’ve seen Eu5.75bn covereds and Eu8.5bn senior.”

Today’s three covered bonds will take the week’s tally to Eu8.5bn, and, if they are the final deals for this week, will end up lending the first full week of supply a distinctively core flavour. However, Portugal’s Caixa Geral de Depósitos (CGD) and Spain’s Banco Mare Nostrum opened the peripheral covered bond market with a bang yesterday (Wednesday), drawing Eu4bn and Eu1.7bn, respectively, and peripheral issuers have been active in the senior unsecured market, too, where Spain’s Bankia is today out with its first public deal since the crisis.

Today’s euro covered bond supply comes from Commonwealth Bank of Australia (CBA), Credit Suisse and Sparebanken Vest Boligkreditt, with all three deals comfortably oversubscribed although not multiple times as has been the case for peripheral supply.

A syndicate banker said that subscription levels for deals from core issuers are positive and encouraging given the difference in spread between them and peripheral supply, and given the amount of supply that has hit the market this week. Bankia began marketing its five year senior unsecured deal at the 250bp over mid-swaps area this morning, while CGD and Banco Mare Nostrum priced Eu750m and Eu500m covered bonds at 188bp and 190bp over yesterday, respectively.

The investor response to core deals is indeed somewhat of a positive surprise, said the syndicate banker, adding that new issue premiums are stable compared with last year, maybe 1bp wider.

Credit Suisse’s deal is the first Swiss benchmark in two years, after the issuer sold a Eu1.25bn five year in January 2012, and, with a seven year maturity, extends the bank’s maturity profile.

Leads ABN Amro, Credit Suisse, Erste Bank, NordLB, Société Générale and UniCredit will price a Eu1.25bn deal at 13bp over mid-swaps, after guidance and initial price thoughts of the 14bp over area. Around Eu1.5bn of orders had been placed by around half-an-hour before the leads were due to close the order books.

Credit Suisse’s longest dated outstanding issue is an October 2018 that was trading at 2bp/-3bp yesterday, with UBS December 2019s another comparable and trading at 2bp/-2bp, according to a lead syndicate banker.

However, as is the case for some other issuers, the outstanding bonds are trading slightly aggressively, with primary markets providing more accurate valuations than secondary levels.

Commonwealth Bank of Australia is following peer ANZ Banking Group into the market, albeit with a five year rather than a 10 year deal, and leads BNP Paribas, CBA, HSBC and RBS will price a Eu1bn deal for CBA at 18bp over on the back of around Eu1.3bn of orders. The transaction was first marketed at IPTs of the low 20s over before guidance of the 20bp over area.

A syndicate banker away from the leads saw the low 20s as a cheap starting point, and flagged the lack of ECB repo eligibility for Australian covered bonds as a disadvantage, while another syndicate official away from the leads put five year Australian comparables at around 17bp over and therefore saw the new issue concession as minimal, as did a lead syndicate banker.

The latter said that CBA 2017s were trading flat to mid-swaps and its 2022s at 27bp over, with ANZ and Westpac at 16bp and 15bp over, respectively, in the belly of the curve.

Sparebanken Vest Boligkreditt is selling the second Nordic covered bond of the year, after a Eu1.5bn five year at 7bp over for Nordea Bank Finland on Tuesday. The Norwegian issuer, meanwhile, is set to price a Eu500m no-grow five year at 10bp over, the tight end of guidance of 10bp-12bp and IPTs of the low teens.

A syndicate banker at one of the leads – Commerzbank, HSBC, Nordea and UniCredit – said that the issuer’s most recent new issue, a Eu500m five year from early September, and Tuesday’s Nordea deal, provided pricing input. Sparebanken Vest’s September 2018s were trading at around 5bp over today, slightly wider than the pre-announcement level, and Nordea’s issue was at 5.5bp-6bp over mid.

Orders exceeded Eu850m for Sparebank Vest’s deal, according to a lead syndicate banker. He said the deal had gone well, attracting a good mix of investors by type and geography, and that the new issue premium was in line with that paid by Nordea.