BNP Paribas and Helaba met with a strong reception for Eu1bn five year benchmark covered bonds today (Monday) on the back of what were seen as fair to generous, but appropriate, spreads, with other issuers expected to take advantage of a positive market.

Helaba’s deal had been expected, after the issuer announced a mandate on Friday – awarded to Barclays, BNP Paribas, Commerzbank, DZ Bank and Helaba – while BNP Paribas came to the market somewhat more “spontaneously”, according to a syndicate official at one of the leads – BNP Paribas, Credit Suisse, ING, Natixis, RBI and UniCredit.

Syndicate officials said that the market is in good shape and that further supply is likely to be launched this week. Deutsche Kreditbank has announced the mandate for a Eu500m seven year no-grow mortgage Pfandbrief, to be lead managed by BayernLB, Commerzbank, HSBC, UniCredit and WGZ Bank, while other deals are also said to be under consideration. Norway’s Eika Boligkreditt today announced the mandate for a roadshow. (See separate article here.)

Italy’s Credito Emiliano has been mentioned as having mandated for a covered bond transaction, and a syndicate banker said that the market has reacted constructively to the latest political developments in Italy, which is due to have a new prime minister, Matteo Renzi, after Enrico Letta resigned on Friday.

“The market is shrugging it off and seeing it as a long term positive,” said the syndicate official.

Moody’s revised the outlook on Italy from negative to stable on Friday, and Italian yields are reported to be at their lowest since 2006.

BNP Paribas and Landesbank Hessen-Thüringen (Helaba) were well received by covered bond investors today, with each issuer pricing its deal at the tight end of guidance on the back of strong demand.

BNP Paribas Home Loan SFH has priced a Eu1bn maximum five year obligation de financement de l’habitat (OH) issue at 8bp over mid-swaps after meeting with nearly Eu2bn of orders from almost 100 accounts, according to a lead syndicate banker.

The deal was first marketed with initial price thoughts (IPTs) of 10bp-12bp over, before guidance was set at the 10bp over area.

Helaba is set to price a Eu1bn five year public sector Pfandbrief at flat to mid-swaps after the leads built an order book of some Eu1.8bn. Initial price thoughts were set at the low single-digits over area, with guidance subsequently set at the 1bp over area.

Syndicate officials away from today’s deals were positive about them, noting that they went well and were marketed in a sensible way.

“It’s quite encouraging,” said one. “Core covered bonds haven’t really made anyone happy this year and French covered bonds have been better offered in secondary so BNP is definitely encouraging.

“You need to pay up a bit if you’re core and it works if you do.”

Assessments of new issue premiums varied, from 2bp-6bp for BNP Paribas’s deal, for example, with 6bp also cited as the concession offered for Helaba’s transaction, although syndicate bankers away from the leads generally agreed with the spreads and how the deals were marketed.

“I think it was generous but necessary to offer new issue premiums in the current market environment,” said one. “Right now investors want to see something more, they want new issue premiums due to the low swap spread levels in general, so I think both issuers made the right decision to go out with higher spread levels and IPT levels to generate enough momentum.”

Another said that BNP Paribas’s OH issue was priced “very fairly”, with a new issue premium of 3bp, and that Helaba started with a somewhat more generous concession but ended up at the right level, of flat to mid-swaps.

A syndicate banker on BNP Paribas’ deal said that he “doesn’t think in terms of new issue premium” about the deal’s pricing. He cited a Eu1.5bn five year for CM-CIC Home Loan SFH from the end of January that was trading at around 11bp over, and said that the leads were also mindful of where Nordic covered bonds were trading.

“The deal got a very solid reception,” he said. “It was a quick process and we’re happy with how it went.”

Comparables cited include a BNP Paribas 3.375% 2017 issue at 7bp through, mid, and a 1.375% 2020 issue at 7bp over.

Helaba paid up versus secondary market levels, according to a syndicate banker on the deal, who cited a December 2017 issue at around 6bp-7bp through mid-swaps, but adopted a “reasonably investor-friendly” start to acknowledge some pushback from investors to recent German Pfandbrief transactions.

NordLB was the last German issuer to come to market with a Pfandbrief, on Wednesday selling a Eu500m five year issue backed by aircraft loans that was only just subscribed.