Helaba found only modest demand for a Eu1bn long six year Pfandbrief today (Monday), despite the market having been boosted by new ECB measures on Thursday and a blow-out Intesa issue on Friday, but bankers remain positive about supply prospects. RBC is pricing a five year US dollar issue.

Helaba’s new issue comes after markets reacted positively to a range of measures announced by the ECB on Thursday, including a Eu20bn monthly increase in QE, a 10bp cut in the central bank’s deposit rate to minus 0.40% and 5bp cuts in the main refi and marginal lending facility rates.

Intesa Sanpaolo was on Friday the only issuer to enter the covered bond market in the immediate wake of the ECB meeting, and attracted the most demand of any benchmark this year, over Eu4bn for a Eu1.25bn seven year issue.

“Intesa’s was a remarkable deal,” said a syndicate official. “You would infer from that that the market looks very supportive, at least for the peripheral issuers.”

Helaba leads Barclays, Erste, Helaba, HSBC and Société Générale launched the long six year public sector Pfandbrief this morning with guidance of the 2bp through mid-swaps area, before setting the spread at 3bp through and fixing the size at Eu1bn, with the book closing at over Eu1bn.

Syndicate officials away from the leads said demand for the new issue appeared to have been relatively modest compared with recent trades, and noted that the book had been relatively slow to develop, with the deal eventually being priced at 1:30pm CET.

“It’s not the most convincing of deals,” said one. “It took some time for them to give a meaningful update on the books, and it was probably the most sluggish trade we have seen for a while.

“Maybe the pre-Draghi enthusiasm has worn off a little, and perhaps if Helaba had started at flat with the aim of tightening a few basis points they would have found the going easier. But they prioritised size, they got Eu1bn, and there is nothing really wrong with this.”

Another syndicate official suggested demand was limited as Helaba was returning the market less than a month after its last benchmark issue, a Eu1.25bn long four year on 16 February that was the first benchmark covered bond to be priced with a 0% coupon.

A syndicate official at one of the leads said that the books had been slow to build today, but said the deal was nonetheless a positive result.

“Perhaps it was a touch slower than recent deals, but then there was significant changes in the yield environment at the back end of last week and risk appetite increasing for more higher beta products,” he said. “Perhaps that had an influence on people taking longer to make their decision today, but Mondays can be more sluggish in general.

“The issuer’s goal was to print Eu1bn, which they did, so this by no means a bad outcome.”

Syndicate officials at and away from the leads said the deal offered a new issue premium of 3bp-4bp, seeing Helaba May 2021s and June 2023s both trading at minus 7.5bp, mid, and added that it offered a pick-up of around 40bp over the Bund.

Bankers noted that after the ECB’s rates cuts on Thursday, Pfandbriefe of shorter than 4.25 years are trading with negative yields.

“Had Helaba’s deal been a five year pricing at minus 2bp or 3bp, it still would have come with a positive yield – just about,” said the lead syndicate official.

Bankers said other issuers are eyeing the market with a view to launching euro-denominated deals this week. They said conditions looked especially supportive for peripheral issuers on the back of a positive reaction to the ECB measures, and after Intesa Sanpaolo’s success.

“I’m a little surprised we only saw the one deal in euros today,” said one. “Things will certainly pick up later this week.”

Syndicate officials noted that debut euro benchmark issues are expected from Denmark’s BRFkredit and Norway’s Sparebanken Sør Boligkreditt, after both completed roadshows last week and with the latter on Friday announcing a mandate for a Eu500m no-grow five year issue, which is expected in the early to middle part of this week.

In US dollars today Royal Bank of Canada leads Goldman Sachs, HSBC, RBC and Toronto-Dominion launched the Canadian bank’s five year issue with initial price thoughts of the mid-90s over mid-swaps. The deal is being priced after the US open.

The new issue is the third benchmark US dollar covered bond in a week, following a Toronto-Dominion $1.75bn (Eu1.59bn, C$2.33bn) five year that was priced at 95bp over mid-swaps last Monday and a National Australia Bank $1.4bn five year priced at 97bp on Wednesday.

A syndicate official at one of the leads cited RBC October 2020s at a Z-spread of 87bp, with TD’s March 2021s 94bp and NAB’s March 2021s at 96bp.

The deal is RBC’s third benchmark covered bond of the year, following a £350m three year FRN on 25 February and a Eu1.5bn five year issue on 27 February.