Sparebanken Sør Boligkreditt sold a twice oversubscribed debut euro covered bond today (Tuesday), a Eu500m five year issue that bankers said positioned the Norwegian issuer well next to its peers. The pipeline has meanwhile filled, with Crédit Agricole, BRFkredit and Axa expected tomorrow.

Sparebanken Sør’s deal, the only euro benchmark covered bond in the market today, came after only Helaba tapped the market yesterday, selling a Eu1bn long six year Pfandbrief that was just oversubscribed. Syndicate officials said they were surprised by the slow start to the week, after markets had reacted positively to ECB measures announced on Thursday and after Intesa Sanpaolo took Eu4bn of demand for a Eu1.25bn seven year on Friday.

“It’s been quieter than anticipated,” said one. “There might have been some worries after Helaba, but it seems like Sør has got us back on track, and it’s going to get much busier tomorrow.”

Sparebanken Sør’s debut had been expected after the Norwegian issuer announced a mandate on Friday, having completed a European roadshow on Thursday.

Leads Danske, LBBW, Nordea and UniCredit launched the Eu500m no-grow five year Norwegian covered bond with guidance of the 25bp over mid-swaps area, before moving to guidance of the 23bp area on the back of books “well above” Eu800m. The deal was then re-offered at 22bp with the book closing at Eu1bn.

“This is a very nice result for a debut deal,” said a syndicate official at one of the leads. “This is a small, not very well-known issuer, and they came after we have already seen quite heavy Norwegian supply, which is not easy, but in the end it was a very good execution and hit each of the issuer’s targets.

The new issue is the fifth Norwegian euro-denominated benchmark of the year, following deals from DBN Boligkreditt and SR Boligkreditt in January and more recent deals from Sparebanken Vest and SpareBank 1 Boligkreditt on 24 February and 2 March, respectively.

Syndicate officials disagreed on which of Sparebanken Sør’s peers were the most appropriate comparables, with some away from the leads citing SR Boligkreditt, as it is also a less established name, and quoting its September 2020s as trading in the low 20s, mid.

Other syndicate officials at and away from the leads said Sparebanken Vest is the closest match to Sparebanken Sør in terms of credit quality, and saw its March 2021s at 16bp, mid.

“In time these issuers will trade close together,” said the lead syndicate official. “If you take the 18bp level at which Vest’s March 2021s were priced as fair value, and think that Sparebanken Sør has added a couple of basis points for the setting up of credit lines, as is appropriate with a debut, then 3bp-4bp premium is a good result.”

Syndicate officials away from the new issue said the deal had positioned Sparebanken Sør well relative to its fellow Norwegian issuers.

“It’s not too far back from the bigger names, which I’m sure they’ll be pleased with,” said one.

The lead syndicate official agreed.

“That’s the goal,” he said. “We could have gone tighter, but the issuer very sensibly wanted to leave something on the table for investors.”

Crédit Agricole Home Loan SFH this morning announced a mandate for a euro benchmark, dual tranche seven and 15 year obligation de financement a l’habitat issue. ABN Amro, BayernLB, Crédit Agricole, Erste, LBBW, National Australia Bank and Santander have the mandate. A syndicate official at one of the leads said the deal will be priced tomorrow, subject to market conditions.

The mandate comes after Crédit Agricole Home Loan SFH yesterday launched a cash tender offer for up to Eu2bn of its euro-denominated hard bullet covered bonds.

Denmark’s BRFkredit is expected with an inaugural euro-denominated benchmark issue in the coming days, after having completed a roadshow last week. A syndicate official at one of leads BNP Paribas, Danske, LBBW and UniCredit said the deal will likely arrive tomorrow.

Axa Bank Europe SFH is also tomorrow set to launch a first euro benchmark since 2012 (see separate article).

The CBPP3 portfolio grew Eu1.705bn last week, a decrease on the previous week’s Eu1.903bn, but the pace of secondary purchases increased while issuance had slowed. Figures released yesterday (Monday) afternoon show that settled and outstanding purchases under the third covered bond purchase programme increased from Eu159.896bn to Eu161.601bn in the week to last Friday.

Some Eu1.75bn of CBPP3-eligible supply settled last week, of which analysts estimated that the ECB bought Eu440m-Eu500m. Assuming no maturities, this implies average daily secondary market purchases of around Eu240m-Eu260m, up from an average of Eu100m-Eu120m or less per day in the previous week.

The ECB on Thursday announced, among other measures, that the monthly target of its asset purchase programme will as of 1 April increase from Eu60bn to Eu80bn.

It also announced the launch of a new corporate sector purchase programme (CSPP), for which purchases will begin towards the end of the second quarter, and an increase of the issuer and issue share limits for supranational bonds purchased under the public sector purchase programme.

Analysts said monthly CBPP3 purchases are likely to remain around the current run rate of Eu7bn-Eu8bn, with the CSPP and PSPP expected to provide the extra Eu20bn per month, but some said covered bond purchases could increase slightly before CSPP buying begins to make up for any shortfall.