The covered bond market was enjoying its second busiest week of the year with the launch of successful benchmarks for Danske and Helaba this (Wednesday) morning, and UniCredit is set to launch its first CPT covered bond tomorrow, with further supply lined up for next week.

The deals for Danske and Helaba come after benchmarks for Raiffeisenlandesbank Niederösterreich-Wien on Monday and Banco Popolare and Dexia Kommunalbank Deutschland yesterday (Tuesday). Meanwhile, Westpac hit the dollar market yesterday and LBBW is set to follow it tomorrow.

A syndicate official attributed the level of activity to issuers’ timetables rather than market conditions.

“A lot have been in blackout, and a lot of them focused on capital trades when they were out,” he said. “And now it is the turn of covered bonds.

“Spreads are tight and markets are conducive,” he added. “But whereas the Greek agreement has been helpful for senior, it has not made a lot of difference for covered where deals could have got done anyway.”

UniCredit last Thursday announced plans for a roadshow to prepare for its conditional pass-through debut and today announced a 10 year maturity via Banca IMI, Credit Suisse, Natixis, RBS and Société Générale that is expected to hit the market tomorrow. A syndicate official at one of the leads said that 2024s issued off the programme UniCredit has previously used for issuance were trading at 14bp over, bid, on an i-spread basis, and that Intesa Sanpaolo 2015s were also at 14bp.

Leads Crédit Agricole, Danske Bank, Natixis, RBC, UBS and UniCredit launched Danske Bank’s Eu1bn long five year deal today with initial price thoughts of the mid-swaps plus low single-digits area, before tightening to guidance of the minus 1bp area, and setting the re-offer at minus 2bp.

The leads built an order book of Eu1.57bn, with 120 accounts, which a syndicate official away from the leads noted was despite the deal being ineligible for the ECB’s covered bond purchase programme and backed by the issuer’s C cover pool, which is comprised of a mix of commercial and residential mortgages from Sweden and Norway.

“Usually investors are not so keen on this sort of collateral,” he said. “I would never have foreseen this trade half a year ago. It shows how strong this market is and you have to give them credit.”

Another banker away from the leads agreed.

“We’ve seen that any trade will go well, but at minus 2bp Danske have knocked the doors off,” he added.

“It’s really a ‘come on in, the water is lovely’ kind of market,” he said.

A syndicate official at one of the leads noted that a Eu1bn five year deal priced at minus 2bp in September 2014 – that was Danske’s first covered bond off its C pool in three years – is trading at minus 6bp, suggesting the new issue still offers value.

“It was a very good result, especially without Eurosystem participation, and exactly on the issuer’s target,” he said, noting that although the deal is not eligible for the ECB’s covered bond purchase programme it is eligible for Level 1B LCR.

Another lead syndicate official said the trade demonstrated that the differentiation between non-Eurozone and Eurozone trades is compressing.

“And there is no let-up in demand,” he added. “It looks like investors will keep buying anything.”

Landesbank Hessen-Thüringen (Helaba) leads Barclays, Crédit Agricole, Credit Suisse, Deutsche and Helaba went out with initial price thoughts in the mid-swaps minus mid to low teens area for a five year deal. Guidance was set at the minus 15bp area, before re-offer was set at minus 17bp on the back of over Eu1.5bn orders for a Eu1bn issue.

“At minus 17bp, it is one of the tightest we’ve seen in the Pfandbrief space,” a syndicate official at one of the leads said, estimating that the deal offered a pick-up of around 1bp from the bid side of the issuer’s curve.

Another lead syndicate official said the price was generous as fair value was around minus 19bp-20bp, considering that Helaba’s most recent covered bond, a Eu1bn four year priced at minus 15bp in November, was trading at minus 20bp, mid.

A banker away from the leads agreed.

“Although this looks extremely expensive, it is significant that it still offers a new issue premium,” he said.

A lead syndicate official said the issuer had been keen to build momentum for a Eu1bn trade, whereas many other comparables had been Eu500m no-grows, and so offered a new issue premium of around 2bp-2.5bp.

There was some price sensitivity in the transaction, with Eu100m of orders dropping out of the book when the price reached minus 16bp, the lead syndicate official said, noting, however, that the deal took just 45 minutes to attract Eu1bn of orders.

The deal also offered a significant pick-up over Bunds, at 18.2bp over the OBL 171, he added. Whereas five year Bunds were today sold with negative yields for the first time, Helaba’s trade offered a yield of 10.7bp.

“The important thing to note is it still offers a positive yield,” said a banker away from the deal. “I think if this was a three year we would be talking about a negative yield.”

He noted that a NordLB Eu500m four year Pfandbrief, priced at minus 18bp on 12 February, is now offered at a marginally negative yield, albeit bid in positive territory.

However, the lead syndicate official suggested that if Helaba had tried to issue a three year it would likely have offered a zero coupon and a yield in the low single-digits.

“We are not quite there yet, in terms of covered bonds selling with negative yields,” he said, “but it is within sight.”

NordLB Covered Finance Bank (NordLB CFB) and mandated leads Commerzbank, Crédit Agricole, DZ, NordLB and UBS are concluding a two-and-a-half week European roadshow today ahead of a targeted inaugural euro benchmark lettres de gage publiques issue.

A syndicate official at one of the mandated banks said that investor feedback had been positive and that the deal is likely to be launched next week.

“It is not a direct comparable, but you can see how successful Danske has been today,” he added. “That shows you how investors might deal with the Luxembourg cover pool.

“The feedback has been positive and I have no doubt the deal will be a success.”