Bankers said order books of Eu900m for a Eu750m five year SCBC covered bond today (Monday) represented a decent result in a difficult market but underwhelmed next to a Swedbank deal priced in better conditions on Tuesday. Banca Carige has, meanwhile, mandated for a euro benchmark.

After announcing a mandate on Friday, SBAB subsidiary Swedish Covered Bond Corporation (SCBC) launched its new issue amid challenging conditions, with syndicate officials away from the leads citing the wider market as being softer than on Friday.

Leads BAML, Commerzbank, LBBW, Nordea and UBS skipped initial price thoughts to launch the Eu750m (Skr7.05bn) five year issue with guidance of the mid-swaps plus 12bp area, before fixing the spread at 11bp on the back of Eu900m of orders. The books were closed at over Eu900m, before the leads fixed the size at Eu750m.

A syndicate official at one of the leads said the deal had gone well given the market backdrop, noting that the iTraxx Crossover was 15bp wider and the main index 4bp wider this morning, while core covered bond spreads had widened by 1bp on the day and peripherals by 2bp-3bp.

“Every issuer that has come to the market recently has had a good idea of what the market is like,” he said. “It is not the best – oversubscription levels aren’t what they were – but if you understand the terms of engagement there is still a window for issuance.”

Syndicate officials away from the leads agreed the deal had gone well considering the market conditions.

“It isn’t a stellar outcome, but to get a Eu900m book is a good result right now,” said one.

Syndicate officials away from the deal said the outcome looked modest compared with that of the most recent Swedish deal, a Eu1.25bn five year issue from Swedbank Hypotek that, after being launched with IPTs of the 10bp area on Tuesday, was priced at 7bp over mid-swaps and gathered over Eu1.6bn of demand.

However, they noted that market conditions had weakened since Tuesday, with Swedbank’s trade now quoted at 8bp to 9bp, bid.

“So it’s not surprising to see SCBC come a bit further back than Swedbank, and with the market looking softer again today it’s tough to see where new issues will print versus last week’s trades,” said one. “This result looks underwhelming compared to some, but it worked.”

The lead syndicate official added that as the first mover, Swedbank had the advantage in attracting demand.

“Yes, side by side this isn’t as good a result, it is smaller and wider, but that reflects how the market has gone,” he said. “Additionally, SCBC weren’t targeting a Swedbank result.

“It’s worth remembering that the issuer did print Eu500m in June, so their size aspiration was less.”

The syndicate officials away from the leads estimated fair value based on secondaries for the new issue to be in the mid-single digits area, seeing SCBC October 2021s at 6bp, bid.

“The price looks attractive and in line with what the market has required,” said one, “but then it is hard to say exactly what is attractive enough right now.”

The new issue is SCBC’s second euro benchmark covered bond of the year, following the Eu500m seven year in June.

DVB Bank is also in the market with a Eu250m no-grow five year ship Pfandbrief. Leads DZ and WGZ launched the deal with IPTs of the three month Euribor plus 48bp area. The books were still open at the time The CBR went to press.

Syndicate officials said that elections in Catalonia on Sunday did not appear to have had a substantial impact on the market, after pro-independence parties won a majority of seats in parliament.

“They may have won a majority, but the separatists did not get over 50% [of votes] so it does not look as though they have a definite mandate for independence,” said one. “That means the market will remain wary until the general elections, but for now the status quo is the same.”

Another syndicate official, noting that Bonos had this morning tightened around 6bp versus Bunds while Italian government bonds tightened by 1bp versus Bunds, said the market had read the result as a positive, as it had removed some uncertainty.

However, noting that a Banco Popular Español Eu750m six year issue sold on Wednesday was now quoted around 10bp wider, the syndicate official said he did not expect Spanish issuers to change their plans according to the result.

“The Banco Popular deal does not set the stage for much further issuance from Spain at the moment,” he said, “and while this headline may be taken as positive it doesn’t change the context and the market is still challenging, in particular for peripheral issuers.”

Syndicate officials said issuers from a variety of jurisdictions were still considering deals this week, but said they expected most to hold off on issuance with the quarter-end approaching.

“It will be a more sedate week than last week,” said one, “but I think we will still see a smattering of supply.”

Italian issuer Banca Carige joined the pipeline this afternoon after announcing a mandate for a euro-denominated benchmark covered bond with leads Commerzbank, Mediobanca, Natixis, Nomura and UBS. European investor meetings will be held from 6 to 10 October.