Danske Bank launched only the second euro benchmark of its “C” (combined) cover pool yesterday (Wednesday), a Eu1bn short five year issue, with an official at the issuer saying that it was tempted into the market by the levels and maturity available in the context of CBPP3.

The mandate for the Eu1bn (Dkr7.45bn) August 2019 deal – out of Danske’s “C” (combined) cover pool – was announced on Tuesday afternoon, with only one euro benchmark covered bond having already been launched this week – a Eu1bn five year for Austria’s Hypo Noe Gruppe Bank – after more than Eu8bn of supply last week.

“Our thinking was that with the ECB coming out with their programme, we saw a strengthening of the market, and an improvement in spreads, and we saw other issuers taking advantage of that, going through mid-swaps,” said Peter Holm, senior vice president, group treasury at Danske Bank. “As we saw it, there was therefore a strong window ahead of the Vienna conference that a lot of market participants will be heading off to soon, and we got the feeling that there would not be that much traffic in covered bonds.

“We therefore thought that it would be a nice time for us to do what the market was pointing towards, which was a five year, which suits our C pool.”

The deal is only the second euro benchmark out of Danske’s C pool, the last having been its debut for the pool in euros in 2011. In the interim the issuer has mainly issued out of the C pool into the Swedish krona market, most recently with a Skr5bn (Eu546m, Dkr4.08bn) three year floating rate note on 20 August.

“The Swedish market is somehow stronger in the shorter maturities,” said Holm, “but here we had the opportunity for a five year and we also felt that that in respect of diversifying a little bit, and not overdoing it in Swedish kronor, launching the euro was a good tactic for us.”

Leads BNP Paribas, Credit Suisse, Danske, ING and UniCredit went out with initial guidance of the mid-swaps flat to plus 2bp area and on the back of Eu1.3bn of demand revised guidance to the mid-swaps flat area, with the deal size set at Eu750m-Eu1bn. With books approaching Eu1.75bn the spread was fixed at minus 2bp, and the deal size was ultimately set at the upper end of the range on the back of a book approaching Eu2bn and including 100 investors.

According to a lead syndicate official, it is the first Nordic euro covered bond print through mid-swaps since the onset of the financial crisis.

“We are of course pleased with that,” said Holm. “The book developed very nicely and that gave us the opportunity to tighten the price through mid-swaps and into the minus 2bp area, and even after we settled on that level we saw the book grow further.

“This could perhaps have led us to tighten it even further, but we didn’t do that – we decided that investors and ourselves should be happy with the minus 2bp. We like to see our bonds perform.”

The issue was seen at -4bp/-2bp this (Thursday) morning.

The deal amount had been announced as Eu750m-Eu1bn.

“If you look at the cover pools from a rating perspective, you don’t necessarily have to do a Eu1bn benchmark size, and it quite often better suits the cashflows in such a pool to do smaller deals, like Eu750m,” said Holm. “But with the quality and size of the book we saw, we availed ourselves of Eu1bn – although a Eu750m deal would have been quite satisfactory for ourselves and the cover pool.”

Banks were allocated 52% of the issue, central banks and agencies 22%, asset managers 21%, and pension funds and insurance companies 5%. Germany and Austria took 51%, France 13%, the Benelux 10%, Asia 7%, the UK and Ireland 6%, eastern Europe 6%, the Nordics 5%, and others 2%.