Belgium’s Belfius and Germany’s Helaba will launch the first new benchmarks from their respective countries tomorrow (Thursday) since CBPP3 began, with market participants saying that relative value versus sovereigns and other SSAs is becoming an increasingly important consideration.

Belfius this (Wednesday) morning announced the mandate for a public sector pandbrief via Belfius, Credit Suisse, Nomura, SG and UniCredit, while Helaba this afternoon named BNP Paribas, Commerzbank, DZ, Helaba and Natixis as leads for a four year mortgage Pfandbrief.

A syndicate official at one of Belfius’s leads said the deal had been announced today to give investors, and particularly the Eurosystem, time to prepare for the new issue, and also taking into account busy issuance in other sectors of the market.

The Belgian bank inaugurated its public sector programme on 6 October with a Eu1.25bn seven year benchmark priced at 1bp over mid-swaps. That deal was said by the lead syndicate official to be quoted at flat/minus 3bp, with mortgage-backed Belfius January 2019s at minus 6bp/minus 9bp, and June 2020s at minus 2bp/minus 5bp.

A banker away from the leads noted that Belfius has chosen a part of the curve where Belgian covered bonds still offer a pick-up against Belgian government bonds.

“If you want real money demand, you have to show a pick-up to government bonds,” he said.

Various bankers said that recent French issues, particularly for BPCE SFH and BNP Paribas Home Loan SFH, had attracted less demand because of their level versus OATs.

According to the lead syndicate banker, September 2019 OLOs trade at around 27bp-28bp on a yield basis and, with the new issue set to come inside swaps given where the seven year came and is trading, the five year should come with a pick-up of at least 10bp-12bp over OLOs, given that the five year mid-swap rate is 45bp.

He said that although the past week’s issues have generated oversubscription levels less than half of those typical of the first two weeks of CBPP3 it is still possible to create more successful outcomes through less aggressive pricing.

“With the Nordea and CFF deals we saw investors chase, chase, chase the market,” he said. “I do think those days are over, but investors have still got to buy.

“So you just need to show investors some respect, and that’s what Crédit Agricole did yesterday (Tuesday) –they did the right thing, they didn’t force the trade.

A Crédit Agricole Home Loan SFH eight year deal yesterday was sized at Eu1bn on the back of a Eu1.3bn order book and priced in the middle of guidance and 2bp inside the middle of IPTs, at 2bp through mid-swaps.

Central banks and official institutions were allocated 55% of the bonds, although 11% was placed to Asia and Eurosystem buying under CBPP3 is understood to have been closer to 40% – French accounts, including Eurosystem buying channelled through Banque de France, was 48%. Meanwhile, Germany and Austria took 27%, the UK 7%, Nordics 4%, the Benelux 2%, and Switzerland 1%, while asset managers were allocated 19%, banks and private banks 16%, and insurance companies and pension funds 10%.

The only previous CBPP3-eligible German benchmark supply to have hit the market since the programme began has been tap issuance by Landesbank Baden-Württemberg and WL Bank. LBBW tapped a June 2018 mortgage Pfandbrief for Eu250m at 22bp through mid-swaps on 10 November, while WL Bank increased a September 2024 mortgage Pfandbrief by Eu150m last Thursday. The former was said to have been mainly placed with the Eurosystem, with the latter also said to have attracted some real money demand.

“It will be nice to see a proper German benchmark to gauge where the real demand is for a Pfandbrief,” said a banker away from the deal.

Outstanding Landesbank Hessen-Thüringen (Helaba) comparables include June 2018s at 20bp through mid-swaps, mid, February 2019s at 18.5bp through and April 2019s at 18bp through, according to a syndicate official at one of the leads.

A banker said that Länder and SSA paper is increasingly sought after as an alternative to covered bonds.

“The ECB has achieved its target in some markets,” he said, “forcing investors into SSA and sovereign bonds.”

Another banker agreed.

“This will be a big theme early next year when the SSA market usually kicks off,” he said, “especially with the ECB talking more openly about buying government bonds.”