Four euro benchmarks met with mixed receptions today (Wednesday), a 10 year Caffil issue finding less momentum than deals for DG Hyp, Erste and RBC, and bankers were divided over the health of the market on the back of Eu7.75bn of issuance this week. BayernLB is expected with a 10 year tomorrow.

Of today’s deals Royal Bank of Canada announced first, yesterday (Tuesday), and leads Deutsche, Natixis, ING, UBS and RBC this morning launched the Eu1.25bn long five year issue with initial price thoughts of 12bp over mid-swaps before moving to guidance of 10bp. The re-offer was fixed at 9bp, with books closing at Eu1.6bn.

Syndicate officials away from the deal noted that RBC’s previous euro trade, a Eu1bn seven year issue on 10 June that was priced in line with guidance, was seen as being negatively affected by a back-up in yields during the execution.

“Realistically that should have had some impact on how this one has gone,” said one, “although perhaps everyone in the market is now used to secondary levels being somewhat meaningless.”

A syndicate official at one of the leads said the new issue appeared not to have been affected by the previous deal’s outcome.

“With spreads having rebased over summer, and new issue concessions all elevated, accounts have been keen to reengage with these levels, and covereds have been a safe haven in what have been some difficult times,” he said. “There was a good selection of both long-standing investors and some new folks participating in this deal and it was a strong result.”

The lead syndicate official said the deal offered a new issue premium of 5bp-6bp, seeing the issuers August 2020s at plus 2bp, mid, and estimating the curve extension to December 2020 to be worth around 1bp.

Erste leads Barclays, Commerzbank, CaixaBank, Crédit Agricole and Erste priced the Austrian issuer’s Eu500m no-grow mortgage Pfandbrief at 3bp, having built books of over Eu1bn. The deal was launched with IPTs of the 7bp area, before setting guidance at 5bp plus or minus 2bp.

The deal followed a Eu500m no-grow seven year mortgage Pfandbrief from UniCredit Bank Austria yesterday (Tuesday), which was the first benchmark Austrian covered bond since February, when Raiffeisenlandesbank Niederösterreich-Wien printed a Eu500m 10 year.

A syndicate official at one of the leads said the deal showed that the market was wide open again for Austrian issuers, while stating that the deal offered a 7bp new issue premium at the start, with a final concession of 3bp, based on the issuer’s secondary curve.

“That secondary curve is in line with those of other CBPP3 jurisdictions,” he said. “That is really encouraging to see after the troubles they have had, and it looks as though the Austrians are back.”

DG Hyp leads DZ, Commerzbank, Natixis, LBBW and WGZ priced the German Eu500m no-grow issue at minus 13bp, building a final order book of Eu1.2bn with around 45 accounts. The leads issued IPTs of the minus 10bp area, before moving to guidance of the 12bp area on the back of Eu800m of IOIs.

The new issue offered only a slim new issue premium if calculated from secondary levels, a syndicate official at one of the leads said, stating that Berlin Hyp’s curve implied a 1bp concession. However, he said the secondary market did not provide the best basis for establishing the premium at the short end of the curve.

“Everything is so massively converging towards zero,” he said. “We are talking about a 5bp yield – not spread, but yield – for three years here – and I think spreads are a little less meaningful than they are further out the curve.

“Recent trades have come up with around 4bp-6bp of premium – we definitely don’t have anything like this here, and it is a particular part of the curve but this deal went well and the bond found its home, so we are happy.”

A syndicate official away from the leads agreed the deal was a good result.

“Anything that is German, a three year and has a positive yield seems to be working very well,” he added.

Meanwhile, Caffil leads BNP Paribas, Natixis, Commerzbank, ING and SG priced the Eu1bn 10 year issue at 3bp over, after going out with IPTs of 5bp and skipping the usual guidance stage.

Syndicate officials away from the leads noted that the execution had been a relatively long process compared with the day’s other deals, and suggested it had not found the same traction for price tightening.

“This seems like the weaker of today’s trades,” said one syndicate official. “I feel sorry for them, their starting point seemed fine and it is strange, because it seems that investors were not keen on it for some reason.

“If it is for the tenor, then why were investors willing to buy 10 year paper from Commerzbank at minus 13bp on Monday but not at these levels today?”

The syndicate official said Caffil’s outcome implied market conditions were worsening, suggesting that the pace of supply may slow as the week progresses. Today’s issuance came after four benchmarks on Tuesday after Commerzbank’s 10 year on Monday.

“For me this market already seems to be turning a little sour and oversupplied,” he said, “and it might be a sensible time for things to cool off a little.”

However, other syndicate officials said the market still appeared to be open for new issues, particularly Eu500m no-grow trades with tenors of five to seven years.

“Apart from DG Hyp, premiums still seem to be elevated, if a touch tighter than yesterday’s and deals for the most part are working well across the curve,” said one.

BayernLB has mandated ABN Amro, BayernLB, Crédit Agricole, DZ and ING for a euro-denominated 10 year public sector Pfandbrief, which is expected tomorrow.

The leads said that 2024-2025 paper from BayernLB, WL Bank, Sparkasse KölnBonn and MünchenerHyp has all been trading between minus 20bp and 18bp.