Belfius today (Monday) became the first issuer to launch a benchmark covered bond since the ECB released CBPP3 details on Thursday, with a Eu1.25bn seven year inaugural public sector issue that attracted Eu2.5bn of demand, and further supply is expected this week.

The European Central Bank released further details of its third covered bond purchase programme (CBPP3) on Thursday after having unveiled its plans a month earlier, saying that buying would start in the second half of October and that the programme would run for at least two years.

Although the plan was received as being looser than the ECB’s two previous programmes, no size was indicated and, with the exception of second tier peripheral issuance, including multi-cédulas, the market’s reaction was more muted than when spreads snapped in after the initial CBPP3 announcement, according to syndicate officials.

“The market had pre-bought into the Draghi story,” said one. “The facts as disseminated didn’t cause so much excitement.

“It doesn’t seem investors are willing to drive spreads tighter by buying at any price.”

Belgium’s Belfius Bank was nevertheless seen as having achieved a success with an inaugural public sector-backed covered bond this morning when it approached the market via leads Barclays, Belfius, Commerzbank, LBBW and Natixis.

One the back of a roadshow, the leads opened books at around 0915 CET this morning with initial price thoughts of the mid-single-digits over mid-swaps. They then revised this to guidance of the 3bp area before re-offering the deal at 1bp over mid-swaps on the back of a Eu2.5bn order book comprising 115 accounts at the time books closed at 1145 CET, according to a banker at one of the leads.

He said that this was “a very good achievement” for the first public cover pool issue given that before execution began Belfius’s mortgage-backed June 2020s were at minus 2bp, mid, and its January 2023s at plus 3bp. He noted that it was flat to where the Swedish Covered Bond Corporation had priced a Eu1bn seven year on Tuesday of last week, but with a much larger order book – the Swedish issuer drew some Eu1.5bn of demand.

He said that the issuer was targeting launch early this week after having finished its roadshow in the middle of last week and given the ECB announcement was due on Thursday and a public holiday in Germany on Friday, and that rather than opt for a two day process with launch tomorrow, the deal was executed today given that it was widely anticipated and that this week is likely to be busy.

“The secondary market is still supportive,” he added.

A syndicate official away from the leads said that the deal was a strong statement that the market remained solid after Thursday’s announcements, with the deal coming flat to where he saw secondaries.

“The fact that they are still pricing flat to secondaries shows that the market is still in good shape,” he said. “The book is as good as, if not more impressive than some we have seen recently.”

Another banker away from the leads said that the deal had gone very well.

“Just a little in plus territory was what I had expected,” he said. “We indicated plus 1bp to one of their peers not so long ago.”

He said that the 1bp level could possibly been arrived at from a slightly tighter starting point, but suggested that the mid-single-digits IPTs were perhaps chosen because of the large size being taken out by Belfius – it is the bank’s largest covered bond since its inaugural issue, a Eu1.25bn five year in November 2012.

Sparkasse KölnBonn is expected shortly with a benchmark via DekaBank, Helaba, HSBC, LBBW and UniCredit after having finished a roadshow last Thursday, and other issuance is due, according to syndicate officials.

However, Caisse centrale Desjardins du Quebec, which has finished a roadshow, is not expected until next week as it finalises the necessary prerequisites, according to a syndicate official at one of its leads – Barclays, Crédit Agricole and DZ.