Hypo Noe Gruppe Bank had the benchmark euro covered bond market to itself this (Monday) morning for a Eu500m no-grow seven year debut mortgage-backed issue, with the only other concrete mandates being longer term projects such as Belfius and Hypo Tirol.

After a hectic week of some Eu8bn of benchmark euro supply last week, syndicate officials said today was quieter, although attractive conditions continue to mean that issuers could move at short notice.

“Hypo Noe shows me that the market still sees robust issuance conditions and demand is still there,” said one. “We saw a little weakness in Bank of Nova Scotia, but everything else performed and there are no signs of any fatigue.”

Leads Crédit Agricole, Deutsche, DZ, Erste and NordLB built a book of around Eu1.25bn for the Austrian bank’s Eu500m no-grow inaugural mortgage-backed benchmark. Some Eu1bn of indications of interest came in on the basis of initial price thoughts of the 10bp over mid-swaps area, then guidance was set at 7bp-9bp, with pricing to be set in that range, before a re-offer of 7bp over was set.

A syndicate official at one of the leads said that the deal came inside fair value based on where outstanding Hypo Noe public sector benchmarks were bid, but that the leads considered a Eu500m long five for UniCredit Bank Austria that was priced at 7bp over last Tuesday as a more useful indicator. He said that on Friday Hypo Noe’s October 2022 had been bid at around 10bp, with its September 2019s at 6bp and August 2022s at 16bp, which indicated fair value of 10bp for a new seven year benchmark – with mortgage and public sector issues seen flat to each other.

“This is where things are getting a little more complicated,” he said. “If you are looking at it on the basis of where UniCredit Bank Austria did something last week and Hypo Noe being a bit better credit, then maybe you would think that the 7bp over level today is fair. But if you look at Hypo Noe secondary bid levels, you might deem this rather expensive.

“Apparently the market widely shared the view that this is OK at 7bp, otherwise they would not have bought, but others maintained that they were not exactly happy given the secondary bid levels.”

He added that the overriding consideration remains: “Buy today, because tomorrow it will either be gone or be tighter.”

A syndicate official away from the leads said that he had expected pricing of 6bp over, so the approach taken by the leads was “fully in line” with his view.

The lead syndicate official said that UniCredit Bank Austria’s five year was today at 4.5bp-5bp, mid.

The maturity was the choice of the issuer, he added, with it seen as being attractive, also relative to where they could fund in senior.

Another syndicate official away from the leads said that the five and seven year maturities should continue to benefit from expectations of CBPP3, while a back-up in rates at the long end should help any 10 year supply, particularly after the success of deals for Abbey and WL Bank last week.

He said that the outlook for this week is benign.

“There are some interesting data points ahead,” he added, “but we don’t expect them to change the game in terms of the issuance window remaining open.”

There is an FOMC meeting on Tuesday-Wednesday and the ECB is set to announce take-up of the first TLTRO on Thursday, when the Scottish independence referendum will be held in the UK.

Belfius Bank started a roadshow today for a new public sector covered bond programme, which was announced at the beginning of the month. Barclays, Belfius, Commerzbank, LBBW and Natixis are working with the issuer ahead of a debut benchmark public sector Pandbrieven issue. An issue is not expected until October, however, with meetings scheduled until 30 September.

According to a banker at one of the leads, a five or seven year issue is most likely. Belfius’s last benchmark, off its mortgage programme, was a 10 year, he noted, and pricing relative to Belgian government bonds is most attractive for investors in the five to seven year part of the curve, while a 10 year issue would come flat to or through OLOs.

Hypo Tirol Bank will on Friday begin roadshowing a debut public sector covered bond issue with Crédit Agricole and LBBW. The deal will be for Eu300m, although a banker involved in the project said that Hypo Tirol is likely to be issuing benchmarks of Eu500m from next year. The roadshow is due to end on 29 September.

In the meantime, Münchener Hypothekenbank is roadshowing the first ever sustainable covered bond with Crédit Agricole, LBBW and WGZ. The Eu300m ESG Pfandbrief is expected later this week, subject to market conditions.