BRFkredit accelerated its funding plans to sell its second euro benchmark covered bond yesterday (Wednesday), according to an official at the issuer, after tightening spreads and falling yields made a longer-dated, pre-summer deal attractive and with markets opening positively.

BRFkredit, a fully-owned subsidiary of Jyske Bank, launched its first euro benchmark covered bond in March, a Eu500m five year issue that attracted over Eu1.2bn of orders and was priced at 20bp over mid-swaps, and its follow-up yesterday was a Eu750m seven year.

“After the inaugural in March, our best estimate was to issue the second benchmark in the fourth quarter of 2016, based on the idea of slowly extending the curve with another five year bond,” said Merete Poller Novak, director, head of debt IR and capital markets funding at Jyske Bank. “During spring, markets have, however, rallied.”

She said that, having observed its debut issue tightening and seeing increased issuance in the seven to 10 year part of the curve as yields fell, the group considered launching a longer-dated second benchmark ahead of schedule.

“Seeing the possibility of extending our curve into seven years – and getting a deal done before the summer break seemed attractive to us,” said Novak. “The market volatility increased over the last one or two weeks due to Brexit, but on the other hand there is a lot of cash still out there that needs to be invested, and in volatile markets covered bonds are safe heaven products.

“So we decided to move forward with the project as markets opened with a positive tone on Wednesday morning.”

Jyske and BRFkredit held a two team, three day European roadshow ahead of the deal, and then on Wednesday morning announced a mandate for a euro-denominated benchmark seven year issue.

Leads BayernLB, DZ, ING and Nordea launched the deal at 9:30 CET yesterday morning with guidance of the 16bp over mid-swaps area. The leads then at 10:45 announced that the books were above Eu800m, with the spread unchanged.

The spread was then fixed at 14bp and the size at Eu750m, on the back of books above Eu1bn, at 11:10. The book closed at over Eu1.1bn, with 85 accounts.

Bankers described the new issue as the most solid benchmark deal of the week. Stadshypotek on Monday sold a Eu1bn six year issue that was only just subscribed, while Caffil yesterday attracted Eu1.3bn of orders for a Eu1bn nine year issue that had the benefit of being CBPP3-eligible.

“I think BRFkredit can take that acclaim,” said a syndicate official at one of the leads. “The deal was very fairly priced and achieved all of the issuer’s targets.”

Syndicate officials suggested that BRFkredit’s deal attracted more demand because of the more positive market tone on Wednesday – following two days of weaker sentiment – and because of its double-digit spread, with the issues from Sweden and France priced at 3bp and 4bp, respectively.

The lead syndicate official saw BRFkredit’s new issue trading 1bp-2bp tighter this morning, whereas the other euro benchmark covered bonds sold this week had widened.

Novak added that the Jyske Bank group this time opted for a benchmark-sized deal, rather than a second Eu500m no-grow issue, in order to be able to give investors better allocation on their orders.

“The book was very much driven by high quality buy and hold investors, many being old acquaintances of the Jyske Group, in addition to new names met on the roadshow,” she added.

Banks were allocated 43% of the deal, asset managers 25%, insurance companies and pension funds 19%, and central banks and official institutions 13%. Accounts in Germany and Austria took 53%, the Nordics 29%, the Benelux 6%, Asia 3%, the UK and Ireland 3%, and others 6%.

Novak said that due to “very successful” growth in Jyske Bank’s home loan products, the group already has enough collateral to build a complete Jyske/BRFkredit euro curve over the next two to three years.

“We will not totally close out the possibility of a third euro covered bond this year towards the fourth quarter of 2016, but we might also wait until first quarter of 2017,” she said. “The most important message for us to send to the market is that we are here for the long run.

“We will build a euro covered curve and expect to issue approximately two benchmarks a year over the next couple of years.”