Aktia and Banco Popular Español are expected to launch the first benchmarks of the week tomorrow (Tuesday), with bankers reporting improved market conditions, but the Spanish bank’s announcement was nevertheless deemed surprising after CaixaBank struggled last week.

Bankers said that the market was more settled market today following a week in which wider market weakness hindered the execution of two new long-dated issues on Wednesday, with trades from CaixaBank and Nationwide Building Society pricing in line with initial price thoughts and guidance rather than tightening through the execution process, as has been the trend for much of the year-to-date.

“The question is whether the new issue market is OK,” said a syndicate official. “We saw those two trades last week challenged in terms of tightening the spreads and building order books, but they are performing well today.”

“Now the market seems relatively OK.”

However, a syndicate banker said that he was surprised to see the Banco Popular mandate. CaixaBank’s Eu1bn 10 year benchmark last Wednesday fell short of expectations in a market where peripheral government bonds dipped significantly, with Nationwide’s Eu750m 12 year deal also underwhelming. Some 53% of CaixaBank’s paper was placed with central banks and this is understood to reflect Eurosystem buying at the top end of percentages seen this year.

The syndicate banker – at one of CaixaBank’s leads – said last week’s issue was today “still somewhat re-offer offered” and that since launch paper had changed hands wide of the re-offer.

“I don’t see the market as having improved significantly since CaixaBank,” he said, “so I was pretty stunned to see them doing another 10 year cédulas. They can do it, but it will need a significant new issue premium.”

CaixaBank’s 10 year came at 15bp over mid-swaps, while a 10 year issued by Bankia on 11 March is now at 36bp over, according to a syndicate official at one of Popular’s leads. Bankinter and BBVA 10 year cédulas launched earlier this year are trading at 7bp and 9bp over, respectively, while a Santander 10 year issued in November is at 12bp over.

BAML, BBVA, Banco Popular, Crédit Agricole and Natixis are lead managers. The deal is rated AA by DBRS and Baa1 on review for upgrade by Moody’s – it is one of the many programmes put on review for upgrade by the rating agency on Tuesday of last week to reflect a change in methodology. [Incorrect Aktia rating comment deleted.]

Aktia Bank is expected to launch a Eu500m seven year issue tomorrow, rated Aaa, having today confirmed its plans after a roadshow. Crédit Agricole, JP Morgan LBBW and Natixis have the Finnish bank’s mandate.

Aktia June 2018 and April 2019 paper was trading at minus 8bp, bid, pre-announcement, according to one of its lead managers. Nordea Bank Finland and Pohjola Bank paper dating from 2019 out to 2024 is all trading at 10bp to 9bp through, while Swedbank March 2022 paper, the most recent Scandinavian seven year issuance, is quoted at minus 8bp.

In the Austrian covered bond market spread-widening continued today. Kommunalkredit Austria February 2021 paper, for example, was quoted at 55bp, bid, 48bp-49bp wider than a week ago, according to a covered bond banker.

The widening – which has also hit other Austrian names to a less extent – is on the back of Kommunalkredit Austria on 13 March having announced a partial sale that will see its covered bonds split between KA New, owned by private equity, and KA Finanz, the wind-down entity of the nationalised lender.

He also said public sector covered bonds had been hit harder than mortgage backed issues.

“Things have turned in a nasty fashion for this asset class,” he said. “Public sector deals are in a particularly difficult position. If you can’t rely on government guarantees it puts the whole idea of public sector backed bonds in doubt.

“I would be very surprised to see primary issuance from Austrian banks in the not too distant future,” he added. “Issuers will be happy to stay away from the market considering how ugly things are for them.”

Meanwhile, Landesbank Baden-Württemberg today tapped a recent three year dollar-denominated deal, increasing the $500m issue to $750m.

The leads started with guidance at 25bp over mid-swaps, the re-offer level of the original deal when it was priced on 26 February. The re-offer was then tightened to 22bp on the back of orders of $400m, driven largely by demand from central banks, according to a lead syndicate official.

A syndicate official away from the leads said the pricing of the deal appeared quite tight.

“It looks a good print,” he said. “The deal had been trading well on the secondary market so it seems sensible.”

A syndicate official at one of the leads noted that the increased size made the deal eligible for LCR Level 1, likely making the paper more attractive to bank treasuries.

He said the issuer had decided to tap the deal after receiving positive feedback from investors who were not involved in the original trade.

“It went very well and quite quickly,” he said. “It was a less volatile market today than last week, so it was a good environment for the trade.”