CFF took CBPP3-eligible new issuance into a second week today (Monday), with a Eu1.5bn seven year benchmark at the same level at which it priced a five year two months ago, while Stadshypotek took non-Eurozone issuance through mid-swaps in seven years with a Eu1.25bn deal.

The supply comes after Nordea Bank Finland kicked off the primary market for benchmarks eligible for buying under the European Central Bank’s third covered bond purchase programme last Wednesday with a Eu1bn 10 year priced at 1bp through mid-swaps. Italy’s Credito Emiliano sold a Eu750m seven year at 25bp over on Thursday, and Spain’s Sabadell a Eu1.25bn seven year at 25bp over on Friday (see separate article).

Compagnie de Financement Foncier announced its mandate on Friday and leads Barclays, BayernLB, Natixis, Santander and UniCredit went out with initial price thoughts of the mid-swaps flat area this morning. This is the same level at which CFF priced at Eu1bn five year on 9 September – a few days after the ECB first unveiled CBPP3.

“It highlights the direction the market is going in,” said a syndicate banker away from the leads.

Guidance was set at the 3bp through mid-swaps area and then fixed at 5bp through on the back of a book of some Eu3.1bn, with the deal size set at Eu1.5bn.

Another syndicate banker away from the leads said he thought the starting point was too generous.

“It was completely obvious that flat was far too cheap,” he said. “Everybody knew it would be minus.”

Some bankers spoken to by The CBR on Friday had suggested an ultimate level of 5bo through for the trade.

The syndicate banker suggested the larger size of Eu1.5bn – the largest euro benchmark in two months – may have explained the more defensive starting point, even if he still considered this overly cautious.

Another banker said that the starting point was not unreasonable.

“They could have been a bit more aggressive,” he said, “but 5bp is not the end of the world in this market, and we had just seen the five year at minus 5bp.”

All of last week’s CBPP3-eligible deals moved some 5bp from IPTs to re-offer.

Sweden’s Stadshypotek is issuing a Eu1.25bn seven year at 2bp through mid-swaps, building on the slew of new tights being set in the wake of CBPP3’s announcement to take non-CBPP3 eligible supply through mid-swaps in seven years.

The pricing compares with a level of 1bp over mid-swaps achieved by Swedish Covered Bond Corporation with a Eu1bn seven year on 30 September.

Leads BNP Paribas, Deutsche, HSBC, Nomura and Svenska Handelsbanken went out with IPTs of the low single-digits over mid-swaps area, which bankers away from the leads said made sense, with the expectation that the ultimate pricing would be at around 1bp through mid-swaps. The leads then set guidance at mid-swaps minus 1bp and priced the issue on the back of orders of more than Eu2bn.

A syndicate official away from the leads noted the more measured approach of Stadshypotek – in terms of pricing versus secondaries – necessary for non-CBPP3-eligble issuance.

“It’s a nervous market,” he said. “IF you are not part of CBPP3 then there is execution risk. The level shows respect.”

Bankers said they expect further supply this week, although nothing official was announced this morning.