SEB and CFF today (Tuesday) added momentum to the market’s reopening by TD yesterday with smaller new issue premiums than the Canadian bank for respective seven and three year deals – the latter made possible by the sell-off in rates. RBC is expected with a seven year deal tomorrow.

Royal Bank of Canada has mandated Crédit Agricole, Danske, Deutsche and RBC to lead its euro benchmark, after Toronto-Dominion Bank yesterday (Monday) priced a Eu1.25bn five year at 1bp through mid-swaps (see separate article for further coverage).

In the wake of TD’s issue yesterday Skandinaviska Enskilda Banken (SEB) announced the mandate for its seven year and Compagnie de Financement Foncier (CFF) for its three year. With the exception of a Banco Sabadell Eu750m five year issue, the Canadian bank’s deal was the first non-German euro benchmark since April 29, when Bank of Ireland sold a seven year issue that was the last euro covered bond of Eu1bn or more.

CFF’s Eu1.5bn three year today is the first new three year euro benchmark since a Eu500m ship Pfandbrief for HSH Nordbank on 3 February and the largest single-tranche euro covered bond since a Eu1.5bn five year Bank of Montreal deal on 15 January. Leads Barclays, BayernLB, Credit Suisse, Natixis and Nykredit built a book of over Eu2.5bn for the French issue today.

Bankers attributed the deal’s execution to the recent sharp back-up in yields.

“When rates were lower you couldn’t do a three year with the yield being negative or flat,” said a syndicate official away from CFF’s leads. “Even though they are still pretty low, at least it has a positive yield.”

The issue is coming with a coupon of 0.125% and a yield of 0.15%. It was priced at the equivalent of 15bp over French government bonds.

“It was quite a smart move to visit a different maturity,” said a syndicate official at one of the leads. “The current environment for long date is not very stable and achieving a spread versus govvies is difficult.

“And we have been seeing buying flows at the short part of the curve – not just by the Eurosystem,” he added, “because of the high yields now.”

The deal is being priced at 11bp through mid-swaps, following initial price thoughts of the 6bp through area and guidance of 8bp through. Syndicate officials at and away from the leads put the new issue premium at around 2bp, citing fair value of minus 13bp based on CFF’s curve, although one put it even tighter, closer to flat.

He also criticised the distance between the IPTs and eventual pricing, noting that the move from guidance to re-offer was greater than that from IPTs to guidance and saying that he had seen demand drop as a result of the final pricing. He was at the same time surprised by the strength of interest in the issue, saying that he had not expected demand for short dated paper to be so large given that the curve has steepened.

SEB leads Crédit Agricole, Commerzbank, HSBC, Nomura and SEB built a book of over Eu1.3bn for its Eu1bn seven year issue and priced it at 3bp through mid-swaps flat after having gone out with IPTs of the flat area and guidance of minus 2bp (+/-1bp).

A syndicate official at one of the leads put the new issue premium at 3bp-4bp, citing SEB April 2021s bid at around 7bp through and the curve extension to the new issue as putting fair value at 6bp-5bp through.

“It’s a good result,” he said. “We managed to get some price tension in spite of the competing supply in and around the market.

“The new issue premium was tighter than on the TD trade, with the smaller size and scarcity value of SEB contributing to this.”

SEB’s last euro benchmark was in October 2013.

A syndicate official away from the leads saw the new issue premium slightly higher, saying that a Eu1bn seven year for Swedbank Hypotek launched in March implied a tighter fair value for SEB’s new issue.