AIB Mortgage Bank today (Wednesday) decided not to proceed with a 10 year covered bond announced yesterday afternoon, joining a series of financial institutions to have pulled deals since last Thursday, and Sparkasse Hannover found going tough with a Eu250m 10 year deal.

The Irish bank had announced its issuance plans early yesterday (Tuesday) afternoon, mandating Deutsche, JP Morgan, Lloyds, Morgan Stanley and Natixis. A long dated issue for an Irish issuer had been mentioned as a potential deal from around the time Eurozone issuance began after the start of CBPP3.

The announcement came despite senior deals being pulled for ASR and Santander Consumer Finance last Thursday, and a Eu1bn 10 year deal for OP Mortgage Bank disappointing on Friday. Nomura also pulled a senior sterling deal only yesterday.

The issuer and leads attracted some sympathy for their plight.

“I think AIB did exactly the right thing today,” said a syndicate official away from the leads. “The market is clearly tired. In an environment where you cannot soft sound accounts anymore the norm is going to be more and more issuers pull deals.”

Another syndicate official away from AIB’s leads said that he had been surprised to see the mandate yesterday.

“Circumstances haven’t changed since the end of last week, when the market closed on a poor and disappointing note,” he said. “It wasn’t necessarily evident on screen prices, but paper was changing hands at bid levels or lower.

“The market hadn’t really improved by yesterday.”

He said that he would have assumed that a new issue of 5bp-10bp would have been necessary for a credit such as AIB, but said that even attractive pricing does not appear sufficient to overcome the weak market.

“My advice to issuer has been, listen, this is not a market where you should put yourself at risk,” he added.

Sparkasse Hannover faced a tougher than expected time with a Eu250m 10 year Pfandbrief this morning, according to a banker at one of leads DekaBank, LBBW, Helaba, NordLB and Sparkasse Hannover.

They went out with initial guidance of the low to mid-single-digits over mid-swaps and priced the deal at 3bp over mid-swaps. This compared with a level of flat to the low single-digits over mid-swaps that another lead banker had mentioned yesterday afternoon.

The lead banker said that the deal was subscribed based on the leads taking some bonds onto their books.

He said that the sub-1% coupon, of 0.875%, was – as with OP Mortgage Bank’s 10 year on Friday – a “clear disadvantage” for the deal.

“This had the consequence that interest from investors was not as large as we would have expected,” he said. “A lot of investors know the name, but they hesitated when it was below 1%, which is a clear obstacle – for the time being, at least.”

He said that ultimately the spread of 3bp over mid-swaps was a very good result in light of market conditions, the 1% issue, the lack of a rating, and lack of central bank support in the shape of CBPP3.

A banker away from the leads however highlighted that a Eu500m 10 year for Sparkasse KoelnBonn on 7 October was trading at around 10bp through mid-swaps today, saying that even taking into account the lack of a rating for Sparkasse Hannover and the other factors mentioned by the lead banker, the new issue appeared quite generous and its lacklustre reception underlined the poor state of the market.

The lead banker said that although the deal was not oversubscribed, he expected it to sell down and perform in the secondary market. Distribution was solely to German accounts, he noted.