Hypo Tirol offers sub-benchmark pick-up, ECB awaited
Austria’s Hypo Tirol Bank offered a pick-up over its Austrian peers on a Eu300m inaugural public sector Pfandbrief today (Wednesday), with the benchmark covered bond market meanwhile quiet ahead of expected further details of CBPP3 tomorrow (Thursday).
Hypo Tirol’s issue comes after benchmarks for DNB Boligkreditt, HSH Nordbank and SCBC in the first two days of the week, but syndicate officials expect the primary market to now take a break until next week.
“Everyone’s waiting for the ECB,” said one, referring to the expectation that the central bank will release details of its planned third covered bond purchase programme (CBPP3) tomorrow after a governing council meeting. “People will then come back next week and reassess the situation.”
Friday is a public holiday in Germany and non-farm payrolls are also due in the US that day. Issuers such as Belfius Bank and Caisse central Desjardins du Quebec are post-roadshow candidates for deals.
Hypo Tirol Bank is pricing its Eu300m no-grow five year debut public sector Pfandbrief today after attracting more than Eu400m of demand.
Leads Crédit Agricole and LBBW went out with initial price thoughts of the high teens over mid-swaps, then after taking over Eu300m of indications of interest set guidance at the mid-swaps plus 17bp area. The spread was then fixed at 16bp when the book reached some Eu400m, with the books due to close half an hour thereafter.
According to a syndicate official, IPTs were partially based on feedback received on a pre-deal roadshow that finished on Monday. He noted that although outstanding Austrian bonds were not referenced as direct comparables, Hypo Tirol’s level compared with a Hypo Noe seven year at around 15bp over mid-swaps, and Kommunalkredit Austria issues either side of the 2019 maturity both bid at around 13bp over.
The lead syndicate official said that the pick-up offered by Hypo Tirol took into account the issuer being a smaller bank and the deal being a sub-benchmark.
A HSH Nordbank Eu500m no-grow seven year mortgage Pfandbrief that was priced yesterday at 7bp over mid-swaps tightened 2bp in the aftermarket and was said to be bid at around 5bp over today.
Germany was allocated 54% of the issue, Asia 17%, the UK 9%, Austria 8%, Switzerland 4%, and other Europe 8%. Funds took 38%, banks 33%, central banks, official institutions and supranationals 20%, and insurance companies 9%.
