Bank of Ireland, Banca popolare dell’Emilia Romagna (BPER), CM-CIC and WL Bank today took euro benchmark covered bond supply to Eu5.75bn since yesterday morning, and two further issuers are already eyeing launch tomorrow. Meanwhile, Lloyds yesterday priced a £1bn three year FRN.

(Article amended to include CM-CIC issue.)

ANZ New Zealand has mandated ANZ, Barclays, Natixis and UBS for a seven year benchmark that is expected tomorrow, and DG Hyp has mandated Commerzbank, DekaBank, DZ, Natixis and WGZ for a Eu500m no-grow six year Hypothekenpfandbrief.

Bankers and issuers again noted a more restrained stance on the part of the Eurosystem with its CBPP3 buying.

“They are quite prudent in how they give their order,” said a syndicate official on Banca popolare dell’Emilia Romagna’s Eu750m seven year OBG, for example. “They are looking more at levels and there are definite pricing breaks, whereas previously they had a buy-at-any-price approach.

“That’s an important development for the covered bond market.”

Officials at Compagnie de Financement Foncier and LBBW, which launched benchmarks yesterday, noted that the Eurosystem was less aggressive. For example, the CBPP3 order for LBBW’s issue came in towards the end of the process, whereas in 2014 Eurosystem orders were typically placed straight away. (See separate articles for further CFF and LBBW coverage.)

Banca popolare dell’Emilia Romagna’s covered bond was only its second euro benchmark and the first Italian benchmark of the year. The lead syndicate official said that the deal was announced relatively early yesterday to give the Eurosystem time to co-ordinate and also to give investors time to consider the infrequent name. He said that a roadshow had been considered, but that, with BPER having October 2018s issued in October 2013 outstanding, it was felt that this was unnecessary, although the leads did want to make sure investors had time to prepare and take in a web-based roadshow before launch.

The syndicate official said that they had good feedback from investors, but that finding fair value for the credit remained difficult. He said some investors looked at Credem as a comparable, but others looked at wider trading names.

BPER’s 2018s were quoted at 30bp, mid, he said, with Credem 2021s at 26bp, while UBI Banca 2021s were at 23bp and 2024s at 33bp. The syndicate official said that on the back of this, investors were looking at fair value as being in the context of the 40bp area.

Leads BNP Paribas, Natixis, Nomura, RBS and UniCredit went out with initial price thoughts of the 45bp over mid-swaps area and shortly afterwards gave a quick update to say that Eu750m of interest had already been taken to demonstrate that there was good support for the name, according to the syndicate official. When demand topped Eu1bn guidance was set at the 43bp area, and the final Eu750m deal was priced at 42bp over. Eu750m was the maximum that the issuer had been seeking from the outset, according to the lead syndicate banker.

He noted that, regarding pricing, the leads also took into account that December 2021 BTPs were trading at 88bp over.

“It is a great result for the issuer to have come at such a level through BTPs,” he added.

Bank of Ireland Mortgage Bank attracted Eu1.6bn of demand for a five year mortgage-backed benchmark that it sized at Eu750m. Leads BNP Paribas, Lloyds, Morgan Stanley, Natixis and Société Générale went out with initial price thoughts of the low to mid-20s before revising guidance to the 22bp area and setting re-offer at 20bp.

“As an absolute level, it’s a great result,” said a lead syndicate official.

He said that Bank of Ireland’s October 2020s were at 15bp, mid, and its March 2019s at 13bp, putting fair value for the new issue at around 14.5bp over mid-swaps, and implying a new issue premium of around 5bp.

WL Bank built a final order book of Eu1.3bn for a Eu500m 15 year benchmark, which it priced at 1bp through mid-swaps. Leads BayernLB, DZ, LBBW, UniCredit and WGZ had set IPTs at mid-swaps plus the low single digits and then guidance at mid-swaps flat.

“I think it was a very decent success,” said a syndicate official at one of the leads. “It definitely reflects the positive mood in the primary market at the moment.”

He said that, with few comparables available in the rare 15 year maturity, the leads looked at a WL Bank 10 year issued in late September, which was initially priced at flat and is now trading at minus 12bp-13bp, bid. He suggested a new 10 year would come at minus 6bp-7bp and, taking into account the curve and the unusual maturity, this would imply a level of around flat to slightly plus.

“And then with a bit of momentum and good demand there was absolutely no problem in pushing this to minus 1bp,” he added. “One could probably have done it even tighter, but minus 1bp is nice and leaves something on the table for everybody.”

Crédit Mutuel-CIC Home Loan SFH priced a Eu1bn seven year at 3bp over mid-swaps after leads Barclays, BNP Paribas, Citi and Deutsche built an order book of Eu1.6bn. After opening books with IPTs of the mid-swaps plus 5bp area they took Eu1bn of orders within half an hour and when the books topped Eu1.4bn set official guidance at the plus 4bp area. According to a banker at one of the leads, the re-offer represented a new issue premium of 4bp-5bp.

Lloyds Bank became the fourth issuer to offer sterling supply in 2015 with a £1bn (Eu1.28bn) three year floating rate note yesterday that leads Barclays, Lloyds, Nomura and Standard Chartered priced at 19bp over three month Libor. The deal comes after Barclays Bank opened covered bond issuance for the year with a £1bn three year FRN on Monday of last week, with Bank of Nova Scotia tapping a November 2017 FRN for £300m last Tuesday and CIBC selling a £500m three year FRN on Wednesday.

The leads went out with IPTs of the 20bp area. This compared with a re-offer of 19bp for Barclays’ FRN last week, while a January 2017 FRN was bid at 14bp over, according to a syndicate official at one of the leads.

After around £1bn of indications of interest were placed at the IPT phase, the leads opened books with unchanged guidance. They then fixed the spread at 19bp and the size at £1bn when books were in excess of £1bn, with the order book ultimately reaching £1.2bn. The lead syndicate official said the bonds were being quoted at 18bp/16bp today.

The UK took 84% of the paper, Europe 15%, and others 1%, while banks and building societies were allocated 77%, fund managers 18%, and others 5%.

The lead syndicate banker said that he would expect to see further similar supply from sterling funders, with non-UK supply likely to come from issuers that have previously tapped the sterling market, such as more Canadians.