BRFkredit sold a Eu750m seven year covered bond today (Wednesday) that bankers said is the most solid deal of the week, with the Danish issuer benefitting from a bounce in market sentiment and being able to reel in investors with a double-digit spread.

Sweden’s Stadshypotek on Monday sold a Eu1bn six year issue that was only just subscribed, while French issuer Caffil yesterday (Tuesday) attracted Eu1.3bn of orders for a Eu1bn nine year obligations foncières issue with the benefit of being CBPP3-eligible.

Syndicate officials said demand for the earlier deals was muted because of a deterioration in market conditions, related mainly to the looming UK referendum on EU membership, while both were priced with the tightest spreads on any benchmarks from their respective jurisdictions this year.

“Considering what has come before, BRF is the most solid, sound result of the three deals we have seen this week,” said a syndicate official away from Danish issuer’s leads. “In a difficult market, it looks like they were able to convince investors, including perhaps some new accounts, and take a larger size than they managed with their debut.

“It is an impressive result.”

Following a European roadshow that concluded yesterday, BRFkredit leads BayernLB, DZ, ING and Nordea launched the seven year issue at 9:30 CET this morning with guidance of the 16bp over mid-swaps area. The leads then at 10:50 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 around 90 accounts.

Bankers said BRFkredit was able to achieve a more convincing result than Stadshypotek and Caffil in part because the market backdrop was more supportive today, with European equity markets up between 1% and 1.5% and the 10 year Bund yield climbing back into positive territory this morning, from a record low of minus 0.03% yesterday.

“The last two days were very weak, but there was a bit of a bounce today,” said a banker away from the leads.

Syndicate officials said the deal also looked more attractive as BRFkredit was able to offer a double digit-spread, with Danish covered bond spreads not having compressed to the extent of Swedish spreads towards those of core Eurozone issuers.

“Working in their favour was that they are a higher absolute spread name,” said one, “whereas Stadshypotek is very tighter versus core Eurozone credits.”

Syndicate officials said the deal offered a new issue premium of around 5bp, seeing BRFkredit’s April 2021s at 5bp, mid, and noting that the average pick-up offered by more frequent Nordic issuers on their seven year paper over their five year paper is 3bp-4bp.

The new issue is the second euro benchmark covered bond from BRFkredit, a Danish mortgage credit institution wholly owned by Jyske Bank. Its debut came in March, a Eu500m five year issue that attracted over Eu1.2bn of orders and was priced at 20bp over mid-swaps.

Bankers said at the time that the spread differential between BRFkredit’s debut and the curve of the more established Danish issuer Danske was around 5bp. Estimating that a new seven year issue for Danske would be priced at around 10bp, a syndicate official away from BRFkredit’s leads said the differential had narrowed to 4bp.

“It’s a very encouraging result for them that they were able to tighten that differential, or at least keep it roughly in line, while taking a larger size out of the market,” he said.

Syndicate officials said meanwhile that while yesterday’s issue for Caisse Française de Financement Local (Caffil) attracted larger books for a larger size, the outcome was less impressive given the deal’s eligibility for the ECB’s covered bond purchase programme.

“I was surprised that Caffil took that window, after Stadshypotek’s muted result,” said a banker away from the deal. “It’s a good result in that they were able to pocket Eu1bn at such a tight level, but if you factor in how much the Eurosystem bought then it is not the strongest deal.”

Central banks bought 55%, banks 31%, asset managers 10% and insurance companies 4%. Accounts in France took 53%, Germany and Austria 27%, the Benelux 8%, Asia 6%, and the UK 5%.

Philippe Mills, chairman and CEO of SFIL and chairman of the supervisory board of Caffil, said the outcome of the issue, launched in “a troubled market”, illustrated investors’ trust in the issuer.

Syndicate officials said further euro benchmark supply is unlikely until after the UK referendum on the 23 June, given the potential for further volatility.

“If BRFkredit had not just happened to be finishing their roadshow yesterday, I don’t think they – or anyone – would have come to the market today,” said a syndicate official away from the Danish issuer’s leads. “They maybe got a bit lucky with their timing, but the smart thing to do now is to stay on the sidelines until after the vote.”

Suncorp-Metway sold a A$500m (Eu328m) five year covered bond today, priced at 110bp over BBSW, down from initial price guidance of the 115bp area. The book was last reported at being over A$500m. ANZ, Deutsche, NAB and UBS were leads.