Swedbank and HSBC SFH built more than twice oversubscribed books for Eu1bn seven year covered bonds today (Wednesday) while offering only limited new issue premiums, which syndicate officials said demonstrated the market’s strength. Meanwhile, Aktia has announced a deal roadshow.

Swedbank leads BNP Paribas, Danske, LBBW, Swedbank and UBS launched the Swedish issuer’s Eu1bn seven year deal with initial price thoughts of the flat to mid-swaps area, gathering IOIs of Eu1.7bn before tightening guidance to the mid-swaps minus 3bp area. The re-offer was then set at minus 5bp on the back of books of more than Eu2.5bn, without a CBPP3 bid given that the deal is from outside the Eurozone.

A syndicate official at one of the leads said that although a price of flat to mid-swaps “was clearly not the price in the issuer’s or the leads’ minds”, it had been a necessary starting point to build momentum for the deal, after recent trades had seen some spread sensitivity.

However, he added that most orders remained after the re-offer was fixed despite the deal offering “only a very small new issue premium, if any at all”.

“It was one of the lowest spread sensitivities we’ve seen in recent deals,” he added.

A syndicate official away from the leads suggested a lack of recent supply from Nordic issuers – with Danske Bank the only other to have come to market so far this year – helped the deal.

“I had thought that pricing at minus 4bp would be the issuer’s best case,” he added, “so it is very encouraging to see them print at minus 5bp.”

Another banker away from the leads said “even if it appears expensive” the deal still offers a new issue premium of around 1bp-2bp – noting that a Swedbank June 2021 deal, a Eu1bn seven year sold in June 2014, is trading at minus 8bp, mid.

“It’s a good result, and sends a very strong signal,” he added. “It shows even none Eurozone deals work with new issue premiums in the context of 2bp.”

HSBC SFH leads Banca IMI, Danske, HSBC, ING, Natixis, NordLB, Santander, Société Générale and UniCredit opened with guidance in the mid-swaps minus 4bp area for the Eu1bn seven year trade, before setting the re-offer at minus 7bp with orders above Eu2bn.

A syndicate official at one of the leads said that the issuer’s relative absence from the market – with HSCB SFH not having issued since October 2013 – was demonstrated by investors’ early interest in the deal, despite the issuer and leads adopting an “aggressive starting point”.

The lead syndicate official said the deal’s Eu1bn size was “relatively fixed” from the start.

“There was only a question of how much to leave on the table for investors,” he said, noting that the main comparables for the trade were an October 2023 trade, a Eu1.25bn 10 year now trading at minus 8.5bp, mid, and an October 2020, a Eu1bn seven year trading at minus 12bp, both from HSBC SFH.

Noting that recent five year trades from French issuers, such as a February 2020 from Société Générale priced at minus 10bp on 19 February, had set historically tight levels, the syndicate official acknowledged “there is an argument for leaving a bit more of a premium for a seven year maturity”.

“I think minus 7bp is a good balance between setting an attractive spread for the issuer and leaving something on the table for investors too,” he said.

He added that investors did not seem concerned that the deal had a soft bullet structure – HSBC SFH’s first covered bond to do so – noting that other French issuers had previously launched successful soft bullet deals.

A banker away from the leads agreed that the deal was supported by the issuer’s relative absence from the market.

“An HSBC SFH covered bond is a rare animal,” he said. “But it is the usual Eurozone, French covered bond story.

“It offers a low new issue premium, if any.”

Another syndicate official said tight premiums offered deals today and yesterday (Tuesday) – particularly that of a Caja Rural de Navarra Eu500m March 2022 priced yesterday – showed the market to be in good form.

However, with an announcement on the final terms of sovereign QE expected after an ECB meeting tomorrow (Thursday) market participants said they expected a quiet end to the week, although one core issuer was said to be looking at a possible trade.

“The market is good and there is no reason it should not be good next week,” said one syndicate official, “so issuers can wait.”

Meanwhile, Finland’s Aktia Bank has mandated Crédit Agricole, JP Morgan, LBBW and Natixis to arrange a series of European investor meetings commencing on 16 March, with a euro-denominated benchmark covered bond to follow, subject to market conditions.