A Eu1bn 10 year senior unsecured deal from Nordea that attracted over Eu4bn of demand at a tight level yesterday (Thursday) could encourage others to opt for senior or capital trades over covered bonds, according to syndicate officials, even if the covered bond market is in good shape.

Sweden’s Nordea, along with fellow leads Deutsche Bank, JP Morgan and SG, priced the Eu1bn trade at 43bp, after building an order book of some Eu4.3bn.

Nordea, via Finnish arm Nordea Bank Finland, had been considered a likely candidate to launch the first Scandinavian euro benchmark covered bond of the year after it kicked off the Nordic bank reporting season last week, but a syndicate official away from the leads said the “hilariously successful” transaction will probably mean that it remains absent from the market in the short term.

With no covered bond mandates in the publicly-announced pipeline except for NordLB Covered Finance Bank after a two-and-a-half week long roadshow due to begin next week, market participants said the significant oversubscription and high quality order book of Nordea’s deal might persuade issuers to opt for other instruments.

“The covered bond, for some issuers, has always been a rainy day trade,” said a syndicate official at one of Nordea’s leads. “The market has always been pretty stable and less volatile to macro trends. So it wouldn’t surprise me to see a few issuers pull the trigger on senior and capital trades while that market it in good shape.

“The Nordics came out of blackout this week, but I think the Swedish names can still fund themselves at much tighter levels in the domestic covered bond market, so I wouldn’t expect any of them to rush to the euro market,” he added. “I think there’s going to be some opportunistic issuances, but I wouldn’t expect an awfully big pipeline.”

Another syndicate official away from the leads agreed that some issuers may be encouraged to look away from covered bonds, although he added that this might be more on the capital side – and this (Friday) afternoon Swedbank announced an inaugural, US dollar AT1 issue. He said that deals are working in all market segments, giving issuers options.

“Issuers can choose to do whatever they feel like doing,” he said. “If they feel like doing covered bonds they can do covered bonds, if they feel like doing seniors they can do seniors, if they feel like doing seniors in Kiwi dollars they can do seniors in Kiwi dollars and so on. The buffet is fully laid out.

“Whoever feels like issuing something next week will probably be welcomed with open arms.”

Another banker said that although he expected the pace of issuance activity to slow, the market appears to be in good shape.

“The best news for the euro market is that CBPP3 involvement is lower than it was last year, and that there are enough other investors still keen to buy into that market,” he said. “From a relative value perspective, with the QE announcement from the ECB, the attractiveness of covered bonds has improved again.”

While acknowledging that uncertainty caused by Greek negotiations over the restructuring of its debt has had an impact on some weaker peripheral names, especially in the senior market, he said the covered bond market appeared resilient.

“With the spread movements we’ve seen in other peripherals on the back of the Greek developments, given the ECB’s decisions on repo-eligibility and so on this week, it gives me some confidence that the market will work through it pretty well even if there is more negative news from Greece,” he added.

Another syndicate official added that this week’s covered bonds had performed well, noting that a BPCE long seven year was trading at minus 2bp, mid, in line with fair value estimates, while a Belfius 10 year was at 4.5bp-5bp, mid, also having tightened than its re-offer level of 7bp.

“The Greece situation hasn’t fed through into covered bonds at all,” he said.