The Covered Bond Report

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CS in biggest 2014 deal as mart displays robustness

Credit Suisse and Eika Boligkreditt met with strong demand for euro benchmark covered bonds today (Wednesday), with the Swiss bank’s being the largest such issue since July 2013 and demand holding up well against the backdrop of events in the Ukraine.

Credit Suisse, Zurich

The Swiss issuer hit the screens this morning with its Eu1.75bn five year covered bond – its second benchmark this year. The deal is the biggest euro benchmark since RBC sold a Eu2bn issue last July.

Leads BayernLB, Commerzbank, Crédit Agricole, Credit Suisse, Danske Bank, Natixis and UniCredit built an order book in excess of Eu3bn and tightened the spread from initial price thoughts (IPTs) of the mid to high teens over mid-swaps to guidance of the 15bp over area before fixing the spread at 13bp over. That is where Credit Suisse’s first issue of 2014, a Eu1.25bn seven year, was also priced.

Syndicate officials away from the leads said the deal went well, especially considering the situation in the Crimea, although they said that guidance of 15bp over was a generous spread.

A syndicate official on the deal said the leads were cautious given a volatile market.

“The idea was to employ a strategy of walking first and targeting an important size, before bringing the spread tighter and tighter,” he said.

Eika’s deal had been expected after the issuer announced a deal-related roadshow in mid-February, which finished yesterday (Tuesday).

Leads Deutsche Bank, LBBW, Nordea and Natixis collected more than Eu1.2bn of orders for a Eu500m no-grow seven year, and will price the deal at 22bp over mid-swaps after IPTs of the mid-20s over, according to a syndicate official at one of the leads. He put the new issue premium at 2bp.

“This was Eika’s return to the market after establishing its new name,” said the syndicate banker. “It went really well, with great granularity.”

The Eu1.2bn order book comprised 70 individual accounts, he said, noting that no impact was felt from the crisis between Russia and Ukraine.

“Had we gone to market on Monday, we likely would have felt it,” he said. “There is so much supply across so many asset classes that it is clear the tensions in the Crimea are having no affect.”

The Norwegian issuer last sold a new euro benchmark covered bond in January 2013, a Eu1bn 10 year that was priced at 43bp over.

CCDQ demand ‘rock solid’ but not ‘crazy’

Caisse centrale Desjardins du Québec priced its first euro benchmark covered bond yesterday (Tuesday) on the back of “rock solid” demand despite a challenging geopolitical backdrop, according to a syndicate official at one of the leads.

The Canadian issuer priced a Eu1bn five year mortgage-backed issue at 15bp over, in line with guidance of the 15bp over area and initial price thoughts (IPTs) in the mid-teens over, after leads Barclays, BNP Paribas, Crédit Agricole and DZ Bank built an order book in excess of Eu1.2bn.

“The deal was 100% fillable, although it did not produce one of those crazy oversubscribed order books,” said a syndicate official at one of the leads. “Those who bought into it will have fun in the medium term. The demand was rock-solid.”

He suggested that the leads were mindful of the political environment with regards to ongoing tensions between Russia and Ukraine when it came to the pricing of the deal.

“It would have been nice to price 1bp to 2bp tighter,” he said. “However, driving tighter could have brought about a lot of risks.”

The syndicate official added that supply from Compagnie de Financment Foncier (CFF), which was in the market alongside CCDQ with its first euro benchmark in one-and-a-half years (see separate article), did not affect the Canadian’s transaction.

“CFF came out of the blue, but it was not really competition,” he said. “People did not decide not to go for CCDQ because there was this surprise supply from Paris.”