Mediobanca found good real money demand for a Eu500m 10 year issue today (Tuesday) thanks to a high coupon while Yorkshire Building Society achieved a “solid” result with a Eu500m seven year. ApoBank is expected tomorrow and Deutsche Bank’s Spanish unit is set to go on the road.

Mediobanca and Yorkshire announced mandates ahead of their deals during a relatively quiet opening to the week yesterday (Monday), with no new euro benchmark covered bonds having been brought to the market.

However, syndicate officials said issuance conditions are supportive and added that issuers would be given confidence by a Eu750m Nordea Bank 10 year non-call five Tier 2 transaction that yesterday took over Eu4.5bn of orders and, from a final spread of 170bp, tightened by around 10bp on the secondary.

“It was a blowout,” said one, “and while the takeaway from that kind of deal is for the covered bond market relatively limited, that positivity would have spilled over into other FIG markets.”

Mediobanca leads Commerzbank, Mediobanca, Natixis and UniCredit launched the Italian bank’s Eu500m no-grow 10 year issue with IPTs of the low 50s over mid-swaps area, before moving to guidance of the 50bp-52bp area with books “well over” Eu500m. They then revised guidance to 49bp, plus or minus 1bp, with orders above Eu750m, before fixing the spread at 48bp. The book closed at Eu750m with more than 50 accounts.

“This went well and, in particular, was solidly oversubscribed,” said a syndicate official at one of the leads. “It shows that the market is good and investors are there if you have a good gimmick.

“This deal’s gimmick is that it’s a 10 year issue that, despite coming with a negative spread versus BTPs, offers a good pick-up with a 1.375% coupon, and that helped many real money accounts get into the trade.”

The lead syndicate official said that the deal came with a yield of 1.5% and around 23bp through the Italian sovereign.

The new issue is the first 10 year benchmark covered bond since 14 September, when Kutxabank sold a Eu1bn September 2025 deal.

Syndicate officials away from the deal noted that the books jumped substantially at the revised guidance update, with some suggesting that this could have been the result of a sizable bid from the ECB’s covered bond purchase programme.

However, according to the lead syndicate official this was not the case. He said the book featured good real money participation and that the Eurosystem’s share was in line with that of recent deals.

“There was no surprise on that end, and the Eurosystem followed their usual procedure,” he said. “The orders grew quickly after the official guidance and investors liked that level.”

Syndicate officials said the new issue offered a premium of 15bp-20bp, based on Mediobanca’s 2023s, which were seen as trading at 27bp-28bp, bid.

The new issue is the Italian bank’s first benchmark covered bond since June 2014.

Yorkshire Building Society leads Danske, DZ, HSBC and UBS priced the UK issuer’s Eu500m no-grow seven year at 25bp over mid-swaps, after having launched the deal with initial price thoughts of the 25bp area and maintained that level for guidance on the back of books above Eu600m. The books closed “well above” Eu600m.

“For Yorkshire this is a solid outcome,” said a syndicate official at one of the leads. “They had the option of tightening the spread by a basis point or so, but the issuer decided that secondary performance and keeping everyone in the book was more important than squeezing the pricing.”

The syndicate official noted that the last UK euro benchmark was a Eu1bn seven year Nationwide Building Society issue on 19 October, which was priced at 20bp over mid-swaps.

“That is a pretty a narrow differential and represents a good result,” he said.

Some syndicate officials away from the leads said that the deal had gone well considering Yorkshire is not one of the best known names and given the UK issuer’s ineligibility for CBPP3. Another syndicate official, however, said he was surprised that the deal had not gained more traction and allowed the leads to move the spread.

“It’s an OK-ish result, but nothing great,” he said.

Syndicate officials at and away from the leads said Yorkshire’s deal offered a new issue premium of around 6bp-8bp, seeing the issuer’s June 2020s at 12bp over and Nationwide’s October 2022s as trading at 17bp-18bp over, bid, before the mandate was announced yesterday.

The lead syndicate official added that the pricing was wider than where an equivalent seven year sterling issue would have landed, but noted that only one fixed rate sterling benchmark covered bond has been launched this year, a £500m seven year Lloyds issue in March.

“There isn’t really a market for that kind of size,” he said.

Deutsche Apotheker- und Ärztebank (apoBank) this afternoon announced a mandate with leads Commerzbank, DZ, LBBW and Natixis for a Eu500m no-grow February 2021 mortgage covered bond expected tomorrow (Wednesday). The German issuer completed a European roadshow last week.

Deutsche Bank SAE this morning announced it will hold a series of investor meetings across Europe, commencing on Monday of next week (9 November) and running until Thursday, ahead of an expected inaugural cédulas hipotecarias euro-denominated public issue.

Westpac yesterday printed a $1bn (A$1.4bn) five year issue at 80bp over mid-swaps, in the middle of IPTs and guidance.

Photo: Mediobanca headquarters, Milan