SCBC attracted Eu1.4bn of orders for a Eu1bn five year issue today (Tuesday), while WL Bank sold a Eu500m 10 year Pfandbrief at what was deemed a good price, and bankers said the high quality paper appealed to risk-off investors after volatility returned to the markets this morning.

Syndicate officials noted European equities were lower this morning, while rates in the middle part of the curve were 1bp-2bp lower today, and at the longer end around 4bp.

“It is certainly not an ideal market for deals this morning,” said one. “The choppiness has returned, rates are lower, and things look a bit tricky again.”

Syndicate officials away from today’s deals also noted that an expected long seven year euro FRN from agency SAGESS, which manages France’s strategic oil reserves, was postponed this morning on the back of the weak open. However, they said SCBC and WL Bank had been right to go ahead with their new issues.

“The open was not helpful but the market is not seriously bad, at least compared to what we’ve seen, and these are good names,” he said. “You can see they made the right decision to go ahead.”

Swedish Covered Bond Corporation entered the market this morning after having yesterday (Monday) announced the mandate for its five year issue, the first benchmark non-domestic Swedish covered bond since a Eu1.25bn February 2021 issue for Stadshypotek on 17 November.

A syndicate official at one of leads Citi, Danske, Société Générale, UBS and RBS said that there was no real doubt whether the deal would go ahead this morning, in spite of the weak market open.

“We announced the deal yesterday and it was the first deal in some time where we have had really positive, solid feedback indicating that investors wanted a trade, with some good numbers behind it,” he said. “Postponing the deal was not on the table in the call this morning.

“It was just a question of the strategy.”

The leads launched the deal with initial price thoughts of the 20bp over mid-swaps area, before moving to guidance of the 18bp area, plus or minus 1bp, on the back of IOIs in excess of Eu1.25bn. The deal was then re-offered at 17bp, with books in excess of Eu1.4bn.

“It was a very good result and was met with widespread interest,” said the syndicate official. “Calling this deal a safe haven might be stretching it a bit, but clearly a five year Swedish covered bond is not an experiment, and with this pricing we were confident the deal would be well-received.”

Syndicate officials said the deal paid a new issue premium of around 7bp, seeing SCBC’s October 2020s at 10bp, bid, October 2021s at 11bp, and June 2022s at 12bp.

“This deal looks good,” said a syndicate official away from the leads. “The pricing was appropriate at the start, with a 10bp premium at IPTs, and they benefitted from the better demand for five year paper.”

The lead syndicate official agreed that the deal’s maturity helped attract investors.

“It shows five years are working well at the moment, as they work for both asset managers and bank treasuries,” he said. “Of course we have the 10 year from Germany out there but that is a different kind of deal.”

After announcing a mandate yesterday afternoon, Westfälische Landschaft Bodenkreditbank leads DekaBank, DZ, NordLB, UniCredit and WGZ priced the Eu500m no-grow 10 year mortgage Pfandbrief at 1bp over mid-swaps, in the middle of guidance, on the back of books “well above” Eu500m.

Syndicate officials away from the deal noted that the pricing process of WL Bank’s deal was similar to that of the last 10 year German Pfandbrief, a Eu500m issue for BayernLB that was priced at 1bp through mid-swaps on 13 January, after having launched the deal with guidance of the flat to mid-swaps area.

“That’s a good result in what is now a worse market,” said a syndicate official away from the leads.

Another syndicate official added that WL Bank will have benefited from a flight to quality on the back of the weaker market sentiment.

“This is a pure German trade, and that should have attracted the risk-off investors today,” said a syndicate official away from the leads. “The books aren’t huge, but they got the deal done.”

WL Bank sold four benchmark covered bonds last year, each Eu500m issues, the last an eight year on 20 October.

Syndicate officials said now that volatile conditions appear to have returned, following more stable sessions since last Thursday, some issuers may this week be persuaded to wait to enter the market, with an FOMC meeting tomorrow (Wednesday) also seen as having the potential to further weaken market sentiment.

“I think a few issuers that are monitoring the market and are now scratching their heads, wondering when the best time to come to the market will be,” said one.

Another syndicate official suggested that other issuers that decide to enter the market this week should, unlike SCBC and WL Bank, opt for intraday executions.

“For them it made sense, as yesterday things looked steady,” he said. “But in this volatile market, I’m not sure how much you benefit from pre-announcing a deal for a two day execution.”

He noted that CFF last week postponed a Eu1bn 10 year OF until Friday, having announced its mandate on Tuesday, after market conditions deteriorated.

“Unless you are a debut issuer or you need feedback, it is a risk, as you just don’t know how the markets will be tomorrow,” he said.