Kreissparkasse Köln opened books for a Eu250m eight year Pfandbrief today (Monday) and Ålandsbanken is due soon with a Eu250m five year, and syndicate officials said a calmer market could support a core euro benchmark if an issuer is willing to pay the necessary premium.

Kreissparkasse Köln, working with a selling group comprising LBBW and WGZ, opened books for its Eu250m eight year deal today with guidance of 7bp through mid-swaps. The deal is expected to be priced on Wednesday.

“We opened the books today ahead of the pricing because of the special nature of this more savings bank-directed transaction,” said a syndicate official at one of the sellers. “We wanted to give enough time to engage with these accounts.”

He said the deal, being Eu250m, was eligible for Level 2 LCR and therefore appealed to different investors than a benchmark would.

“This deal is aimed at a smaller group of accounts that are expecting some kind of premium of around 5bp-7bp,” he said. “Given the current environment, you have to add a couple of basis points.”

Noting that Sparkasse KölnBonn October 2024 paper was quoted at minus 16bp, bid, the syndicate official said the new deal’s guidance left some room for tightening, possibly into the minus high single-digits, while also offering a pick-up versus more liquid issues.

Ålandsbanken today announced the mandate for a Eu250m five year deal, with leads Commerzbank and Nordea, after having finished a roadshow last Tuesday. The deal is expected to be launched this week subject to market conditions.

“It is a special project but maybe this trade will help get things started in the market,” said a syndicate official at one of the leads.

Syndicate officials said that some issuers are eyeing the market, adding that conditions are currently stable enough to support a benchmark deal from a high quality core issuer, following a period of sustained volatility that has led to there being no euro benchmark issuance since 29 April.

Noting that the 10 year Bund yield has today remained within a 0.64%-0.67% range, one banker said conditions appeared to be calming down.

“If we see another day of Bund moves like today’s, of around 2bp-3bp, we will see more issuers come forward,” he said. “No one wants to be the first, but when one bank shows that the market works, more will follow.”

However, bankers said issuers would have to offer larger than usual premiums to entice investors back to the market. One syndicate official, identifying Nordic names as potential frontrunners, questioned whether issuers would be willing to pay up.

“Should these conditions we are seeing today prevail we might see some euro benchmark issuance, in particular from the Nordics,” he said, “but in this market you will have to start quite a bit wider than you normally would, and Nordic issuers do tend to be quite price sensitive.

“It remains to be seen whether they will pay that price.”

Another banker agreed, adding that while technicals are conducive for new issuance, issuers that can be more flexible regarding timing are likely to wait.

“Technically everything is set for that first deal,” he said, “but practically you’d still need to be a bit of a Braveheart to go ahead with it.”

Bankers also said that an EU summit to be held on Thursday and Friday would narrow the window for issuance to Tuesday and Wednesday.