Bank of Ireland and Nordea Bank Finland sold euro benchmarks today (Monday) and bankers said the demand they enjoyed is a positive sign in a week in which many issuers are eyeing the market, with Caffil expected tomorrow after having announced a mandate this afternoon.

Today’s deals arrived amid an improving wider market environment, with the iTraxx Main this morning opening 1bp tighter and the iTraxx Crossover 3bp tighter, and with covered bond spreads stable. However, bankers said new issue conditions remained challenging after a week in which elevated spreads and limited demand meant a modest MünchenerHyp Eu500m long six year was the only euro benchmark to be sold.

Bankers noted that today’s trades progressed relatively slowly, with book updates not arriving until late morning, but said the eventual results were encouraging in a week when the pipeline is well stocked and further supply expected.

Nordea Bank Finland leads Barclays, LBBW, Nordea and Société Générale are pricing the seven year issue at 7bp over mid-swaps, after having gathered Eu2bn of orders. The deal was launched with initial price thoughts of the 10bp area before guidance was set at 8bp plus or minus 1bp. The size of the deal was not available at the time The CBR went to press.

Syndicate officials said the size of the order book was particularly impressive even when considering that the deal is eligible for CBPP3.

“It is a very good outcome, and I am quite glad to see a deal like this, especially after the tough times we have had and at the beginning of a week in which we will likely see more activity,” said one.

Syndicate officials away from the leads said fair value for the new issue was around flat to mid-swaps, based on Nordea Finland’s secondary curve. The issuer’s June 2020s were quoted at minus 2bp, bid.

“That looks fair,” said a syndicate official away from the leads.

The new issue is Nordea Bank Finland’s second euro benchmark of the year, following a Eu2bn dual tranche 5.25 year and 12 year deal in March.

Bank of Ireland Mortgage Bank leads Citi, HSBC, Morgan Stanley, Nomura and SG launched the Eu750m February 2021 issue with IPTs of the 35bp over mid-swaps area, before issuing guidance of 33bp-35bp and then fixing the spread at 33bp. The books closed at over Eu1bn.

“It is another good result,” said a syndicate official away from the leads. “They have paid up to get it, but not by so much, and it’s encouraging to see a peripheral deal get some size and tighten in the pricing.”

Syndicate officials away from the leads said fair value for the new issue is in the low 20s, based on Bank of Ireland’s secondary curve, with the January 2020s seen as trading at around 20bp, bid. They noted that AIB Mortgage Bank July 2020s were also quoted at around the same level.

They said this was in line with the premiums offered by recent peripheral deals, with a Bankinter Eu750m five year on 1 October and a Banco Popular Español Eu750m six year on 23 September cited as paying pick-ups of 15bp-20bp from secondaries.

“With the market still uncertain, that was the right approach to take,” said a syndicate official.

He said the new issue also offered a 30bp-40bp pick-up versus the Irish sovereign.

“That’s a very healthy pick-up, and it no doubt was a factor in this deal going well.”

The deal is the third time Bank of Ireland has tapped the euro covered bond market to sell a benchmark this year, with the issuer having printed a Eu750m five year in January and a Eu1bn seven year in April. AIB’s Eu750m five year issue in July was the most recent Irish trade.

Caffil this afternoon announced a mandate for a euro-denominated January 2023 issue, which is expected to be launched tomorrow, subject to market conditions. Barclays, Crédit Agricole, Deutsche Bank, LBBW and Natixis have the mandate.

The French issuer’s last deal was a Eu1bn 10 year priced at 3bp over mid-swaps on 2 September. Its January 2022 and April 2023 issues were this morning quoted at 4bp and 5bp through mid-swaps, bid, according to a banker at one of the leads.

Syndicate officials said several issuers are watching the market, with Banca Carige and Raiffeisenlandesbank Niederösterreich-Wien having completed roadshows last week and deals also expected from Hypo Tirol and Raiffeisenbank a.s., which finished promoting potential deals at the end of September. Eika Boligkreditt and Sparkasse Pforzheim Calw will complete investor roadshows and calls tomorrow (Tuesday).

“They will have been watching how these very early bird movers work,” said a syndicate official. “But I fear that things will continue to be difficult this week, and there will be no easy sells.”

Another covered bond banker said that although the covered bond market could be benefiting from a better wider tone in financials, the level of new issue premiums required remains elevated.

“A new issue premium of 6bp-8bp for a core European name like Nordea is quite a lot,” he added.

However, one syndicate official said today’s trades gave good reason for optimism.

“These results are encouraging, Nordea’s in particular,” he said. “I think that we will see more good supply this week.”