New issuance in euro covered bonds was relatively staid today (Monday) compared with “storming” activity in a periphery-dominated senior unsecured market, but Aareal and Bank Austria still drew solid demand for Eu500m deals and pbb is next in line.

The FIG primary markets today generally picked up where they left off on Friday, after a busy week that generated Eu19.5bn of supply across 19 transactions in covered bonds and senior unsecured, with peripheral issuers diving into the senior unsecured market this morning – Italy’s Intesa Sanpaolo and Banca Popolare Vincenza are out, as are Portugal’s Banco Espírito Santo and Spain’s Banca Popolar Español.

In covered bonds, meanwhile, new euro issuance is coming from core issuers Aareal Bank and UniCredit Bank Austria, which are pricing Eu500m five year and 10 year mortgage deals, respectively. Both transactions were announced on Friday.

Core supply is set to continue tomorrow (Tuesday), with a mandate for an eight year issue for Deutsche Pfandbriefbank (pbb) hitting the screens shortly before The CBR’s publication. Commerzbank, Crédit Agricole, Danske Bank, LBBW and Nomura will lead manage the transaction, which a syndicate banker on the mandate suggested could come in the mid-teens over mid-swaps.

Another syndicate banker said that peripheral issuers are focussing on the senior unsecured market over covered bonds given that levels attainable in the former are more compelling than they have been in the recent past.

“Senior has become significantly more attractive,” he said.

Peripheral issuance in covered bonds has been limited to deals for Portugal’s Caixa Geral de Depósitos (CGD) and Spain’s Banco Mare Nostrum on Wednesday – two out of the nine new euro covered bond benchmarks priced last week – but CGD’s issue was the most sought after out of last week’s transactions, with some Eu4bn of demand placed.

“The music is playing in the periphery,” said a syndicate official. “It’s tougher in the core.”

Spreads in core covered bonds are at multi-year lows, with demand for higher yielding peripheral supply is said to be driving spread compression.

A syndicate official was fairly positive about the outcome of today’s covered bonds, saying that a Eu500m 10 year issue for UniCredit Bank Austria went well, while “rather aggressive” pricing for Aareal would suggest the transaction was carried by German-speaking accounts.

Aareal Bank has priced a Eu500m five year mortgage Pfandbrief at flat to mid-swaps on the back of around Eu800m of orders. Leads Dekabank, DZ Bank, HSBC, LBBW and UniCredit set initial price thoughts (IPTs) in the low single-digits and then guidance in the 1bp over area.

Lead syndicate officials said the deal went well despite the tight levels on German Pfandbriefe. They said that pricing inside mid-swaps was discussed, but was decided against as this would have met with resistance and sent the wrong signal.

Aareal’s longest dated outstanding mortgage Pfandbrief before today’s deal was a June 2018 issue. One of the syndicate bankers on the trade put the new issue premium at 3bp-4bp.

“It was pretty straightforward,” he said, but noted that core issuers have to pay a bit of a new issue premium in the market at the moment.

Opening order books before Aareal this morning was UniCredit Bank Austria, which will price its Eu500m no-grow 10 year mortgage issue at 35bp over. Leads BNP Paribas, Commerzbank, Lloyds, UBS and UniCredit built an order book of over Eu950m. IPTs were the high 30s over before guidance was set at the 37bp over area and then revised to 35bp-37bp over.

Bank Austria’s mortgage Pfandbriefe are rated Aa1 by Moody’s, while Aareal Bank’s are rated AAA by Fitch.

Bank Austria’s deal comes after it priced a Eu500m seven year public sector issue at 25bp over in late October, its most recent euro benchmark before today.

A syndicate official away from the deal said the pricing was in line with his expectations.

Bank Austria’s parent, Italy’s UniCredit SpA, was one of the first issuers out in the senior unsecured market last week, pricing a Eu1.25bn seven year at 170bp over.