HSH, Belfius and BPCE today (Monday) are preparing to price new benchmark covered bonds tomorrow, with market participants noting that supply this week looks set to continue untroubled by volatility caused by ongoing negotiations over a possible restructuring of Greek debt.

HSH Nordbank is expected to launch a rare ship Pfandbrief tomorrow (Tuesday) after taking indications of interest today, with leads Barclays, Deutsche, HSH, JP Morgan and Natixis, after a roadshow in Germany last week and investor calls today. Initial price thoughts were set at the mid-30s over mid-swaps area, with the issuer targeting a size of Eu500m.

A syndicate official at one of the leads said the pricing for such a niche product was based on feedback from the roadshow. He added that the deal is expected to be eligible for the ECB’s third covered bond purchase programme, although a banker away from the leads noted it would not be LCR eligible.

“That could make it challenging,” said the latter, “but I think at around 30bp it will hopefully be an OK trade.”

HSH’s Schiffspfandbriefe are rated Baa2, one notch higher than the bank’s Baa3 senior unsecured rating. The issuer in 2008 sold the first jumbo ship covered bond, a Eu1bn two year deal.

Belfius Bank announced a mandate for a 10 year covered bond to be priced on Tuesday, with Belfius, Citi, Crédit Agricole, Deutsche and LBBW as leads. A syndicate official at one of the leads said the issuer was targeting a size of around Eu1bn.

He noted that an outstanding Belfius June 2024 deal is trading at 3bp, mid.

“In the context of recent trades we would expect a new issue premium of around 3bp,” he said.

The last Belgian benchmark covered bond was a Eu1bn seven year for KBC Bank that was priced at 2bp over mid-swaps on 15 January. Belfius’s last benchmark was a Eu500m five year at 4bp through mid-swaps on 20 November.

Meanwhile, BPCE mandated Banca IMI, Deutsche, Danske, Natixis and Santander for a Eu750m long seven year deal, to be executed tomorrow.

A syndicate official at one of the leads said BPCE had an outstanding March 2022 deal trading at minus 3.5bp, mid, and a November 2023 at minus 2.5bp, putting fair value at around minus 3bp.

He added that despite some volatility, it seemed a good time for issuers to come to the market.

“The relatively modest sizes of deals are helping,” said the syndicate official, “QE has obviously pushed spreads in, and the SSA space is really tight – all making these valuations look attractive.

“Despite the Greece volatility, we’re seeing that things look OK.”

A banker away from the deals said that although the market seems relatively quiet, it is stable.

“I don’t see any reason why you wouldn’t want to do a trade,” he said. “If Syriza keep saying what they are saying in Greece then you will get volatility. But as you saw last week, the market was volatile and Bankinter and AIB still managed to get very good trades done.

“I don’t see the backdrop derailing the outcome of most transactions, as long as they are not from the most challenging of names. Certainly nothing is going to stop Belfius.”

Another syndicate official away from the mandated deals agreed that after a slightly weaker closing on Friday and then “those punches from Greece and Brussels” the market looked in good shape.

“Covered bonds are looking attractive versus government bonds,” he said. “It’s fairly open for issuers. In the absence of any major events – any headline can cause a bit of volatility – the overall topic remains the ECB’s QE programme.

“I would not see any reason for a core or semi-core issuer not to move forward now.”

In sterling, Leeds Building Society today sold a £300m (Eu400m) three year covered bond at three month Libor plus 27bp, after leads Barclays, HSBC and Santander set guidance at 27bp-28bp.

A syndicate official away from the leads said that it was difficult to estimate the new issue premium offered by the deal – the issuer’s first sterling covered bond trade since 2012.

“The most recent sterling trades to come to market were all from the likes of Lloyds and Barclays and they’re all significantly tighter than this,” he said. “It’s slightly different pricing a building society versus one of the big high street banks.”

A late book update put it at in excess of £300m, but the lead syndicate official said that in spite of the modest oversubscription the deal could be described as a success.

“They’ve got a trade printing at the tight end of guidance and what looks like a very attractive level versus where UK issuers are printing in euros, for instance,” he said. “They are taking advantage of the demand for covered bonds.”