Commerzbank and National Bank of Canada hit the market with successful seven year benchmarks today (Monday) and CGD is expected tomorrow, but supply eased from last week’s record pace even if market conditions remained supportive ahead of ECB and Greek moves.

Caixa Geral de Depósitos (CGD) mandated LBBW, Natixis, Nomura, Santander and itself for a seven year benchmark that is expected tomorrow (Tuesday) and will be its first benchmark covered bond in a year.

Those working in today’s trades said that the market was still supportive, opening on a positive note despite negative news from China overnight, with iTraxx indices opening stable and equity indices up a little.

“The market is definitely supportive,” said one. “Everyone is of course eyeing Thursday.”

That is when a sovereign QE announcement is expected after a meeting of the governing council of the European Central Bank, while Greek elections on Sunday are another key event in the calendar.

In spite of the two benchmark covered bonds today, supply was down on the first four days of last week when three or four deals were launched on each day, and the senior unsecured market was also quieter today after having been similarly busy to covered bonds last week.

Bankers involved in Commerzbank’s Eu500m seven year Pfandbrief issue, which was priced at 10bp through mid-swaps, said that the issuer prioritised spread over size.

Leads Commerzbank, Crédit Agricole, DZ, Mediobanca and Natixis went out with initial price thoughts of the low to mid-single-digits through mid-swaps and after generating some Eu700m of interest set guidance at 10bp-8bp through. The re-offer was set at 10bp through on the back of Eu800m of demand, and the final order book totalled over Eu900m and 45 accounts.

“As the issuer wasn’t really looking to do a lot we were pretty confident from the outset,” said a banker at one of the leads, noting that the Eu500m size was in line with most of Commerzbank’s benchmarks.

The re-offer compared with levels of minus 17bp, mid, for Commerzbank’s October 2020s and minus 13bp for its November 2023s, and the banker said that the new issue premium was a couple of basis points over the bid side, in line with recent Germany supply. Another lead banker said that the 10bp through level was what had been targeted from the start and should be considered in the context of DG Hyp last week pricing a six year at 12bp through and WL Bank a 15 year at 1bp through.

“This could look expensive,” he said, “but if you compare it with the same universe, it is fairly priced.”

Demand was predominantly German, with 85% of the issue placed domestically, although the banker said that they saw some nice demand from real money accounts across Europe. France was allocated 6%, Austria and Switzerland 4%, Italy 3%, and others 2%.

The Bundesbank was said to have been involved under CBPP3, and central banks and official institutions were allocated 26% of the paper. Banks took 42%, asset managers 426%, and insurance companies 6%.

National Bank of Canada (NBC) launched its new issue this morning after having on Thursday finished a roadshow that had been announced a week earlier. The Eu1bn (C$1.38bn) seven year deal is the second from Canada this year, with Bank of Montreal having on Thursday sold a Eu1.5bn five year issue that is the biggest covered bond so far this year.

Leads BNP Paribas, Commerzbank, HSBC, NBC and RBS went out with initial price thoughts of the mid to high teens over mid-swaps, before setting guidance at the 15bp area and re-offering the paper at 14bp over. The leads built a book of around Eu1.5bn comprising over 75 accounts, according to a syndicate official at one of the leads.

He cited as a comparable the issuer’s March 2021 paper, which was quoted pre-announcement at 7bp, mid, while Bank of Nova Scotia September 2021s were at 9.5bp and TD October 2021s at 7.5bp. He put the new issue premium at up to 3bp.

“That’s fair,” he added. “It’s not as tight as for Bank of Montreal, which was basically flat to the bid side, but it was nevertheless a very solid transaction.”

A banker away from the leads also remarked that the book was smaller than Bank of Montreal’s, but said that the Eu1.5bn of orders was a decent result and that the new issue premium was similar to that paid by Australia’s Westpac on a seven year deal that was the first benchmark of 2015.

Another said that it was not surprising to see higher new issue premiums on deals that are not eligible for CBPP3, and also being sized larger than, for example, Commerzbank’s Eu500m.

The lead syndicate official noted that, while last week’s supply of 14 deals had been “excellently” digested by investors and there had been no signs of a deterioration in market conditions, investors were reacting slightly more slowly to today’s deals.

“Let’s see how this continues into the rest of the week,” he added.

The seven year Caixa Geral de Depósitos benchmark expected tomorrow will be the bank’s first since it sold a Eu750m five year in January 2014, and the first Portuguese benchmark since CBPP3 began.

“This is clearly one of the more interesting trades of the week,” said a banker away from the leads. “We saw Italian and Spanish supply last week, but to me it will be interesting to see how the market responds to a Portuguese name.

“They are at the wider end of the non-core countries, but in theory it should work and I don’t have any concerns on that front.”

A syndicate official at one of Caixa Geral’s leads said that he expects the market to remain supportive and that the deal has already gotten quite good traction. He said that Caixa Geral January 2020s are at around 50bp, mid, with its January 2019s at around 36bp, while Banco Santander Totta June 2019s – the last Portuguese benchmark, issued in June 2014, are at 25bp.

Other issuers are reported to be still eyeing the market, although some are said to have already decided to hold off until next week at the earliest and wait out the ECB and Greek decisions.

“After the way the market has ridden out the volatility from the Swiss franc move last week, I feel relatively confident that the market will still be there after those events,” said the syndicate official.