SpareBank 1 took over Eu1.75bn of orders for a Eu1bn 10 year covered bond today (Tuesday), while Commerzbank sold a Eu750m long 10 year only 1bp wider than a smaller issue for WL Bank yesterday, and bankers said the deals proved the superiority of the long end. Pbb sold a $500m debut.

WL Bank reopened the euro covered bond market yesterday (Monday) after a month without new benchmark supply, selling a Eu500m 10 year Pfandbrief that, having been priced at 17bp through mid-swaps, is the tightest ever 10 year benchmark.

Commerzbank and SpareBank 1 Boligkreditt yesterday announced mandates for euro benchmarks in the 10 year part of the curve, before entering the market this morning.

“Neither of these deals are exactly what you’d call blow-outs, but given how low yields have gone they have probably gone as well as you could hope for,” said a banker. “Most of all, they show duration is king.”

Commerzbank leads BayernLB, Commerzbank, Crédit Agricole, Mediobanca and UniCredit launched the December 2026 mortgage Pfandbrief with guidance of the mid-swaps minus 13bp area. Guidance was then revised to minus 15bp, plus or minus 1bp will price within range, on the back of over Eu750m of orders. The spread was then fixed at minus 16bp and the size at Eu750m.

Bankers noted that Commerzbank’s deal was priced 1bp wider than WL Bank’s deal yesterday, with Commerzbank’s leads having launched the deal with slightly wider initial guidance. They said this was a good result, given that Commerzbank’s deal is slightly longer and Eu250m larger, while the size of WL Bank’s deal was limited from the start at Eu500m.

Some bankers suggested that Commerzbank could have either priced the deal tighter still or managed to attract more demand had it not been for the competing supply from SpareBank 1, which offered a substantially wider spread for a triple-A issue in the same part of the curve.

“Looking at where WL Bank priced yesterday, I think it is likely that Commerzbank would have started a basis point or so tighter had there not been any competing supply today,” said a syndicate official. “Obviously Pfandbriefe are a class of their own, but if you’re looking for any kind of spread compensation then the SpaBol is much more attractive.

“I know where I would have put my money if I was an investor today.”

However, another syndicate official away from the leads disagreed.

“WL Bank achieved a very similar result yesterday, and I don’t see why Commerzbank should be taking substantially larger orders than them,” he said. “Commerzbank have been very active since Brexit and taken a lot out of the market, so I don’t think it’s fair to say they could have got more demand.”

The deal is Commerzbank’s fifth sizeable Pfandbrief issue since June. It sold two new benchmarks, a new Eu500m 10 year on 2 June and a Eu750m eight year on 4 July, before returning to the market to tap the 10 year issue by Eu500m on 12 July. It then on 12 August tapped a July 2024 by Eu250m.

Bankers said Commerzbank’s deal offered a new issue premium of around 4bp, seeing Commerzbank June 2026s at minus 22bp, mid.

SpareBank 1 leads BNP Paribas, Citi, HSBC and UniCredit launched the 10 year issue with guidance of the 8bp over mid-swaps area. The leads announced that books had exceeded Eu1bn after around 40 minutes, before the size was later fixed at Eu1bn (Nkr9.31bn) and guidance revised to the 5bp area, plus or minus 1bp will price within range, on the back of over Eu1.75bn of orders. The deal was then re-offered at 4bp.

“It’s gone very well,” said a syndicate official away from the leads. “It’s a good size book, especially for an issuer that is arguably in the second tier in Norway, behind DNB Boligkreditt.”

Syndicate officials said it was difficult to calculate fair value for the new issue, as the longest dated Norwegian outstandings are 2023s. SpareBank 1 Boligkreditt September 2022s were seen at minus 4bp, mid, and March 2023s at minus 5bp, and 2021-2023 paper from fellow Norwegian issuer DNB Boligkreditt at minus 5bp.

Syndicate officials at the leads noted that the curves of Nationwide Building Society of the UK and Commonwealth Bank of America – both ineligible for the ECB’s covered bond purchase programme, as is SpareBank 1 – show a pick-up from 10 year paper over seven year paper of 6bp and 4bp, respectively.

Estimating that fair value was around flat to mid-swaps, a syndicate official away from the leads said the price was appropriate.

“It was the right starting point, and they landed about where I’d have put them,” he said. “In this low yield environment, a new issue premium of around 4bp feels right.”

Bankers noted that it is rare for Norwegian issuers to launch such long dated deals, with the last 10 year euro benchmark from the country a Eu1bn January 2023 issue for Terra BoligKredit (now Eika Boligkreditt) in 2013.

“It is a function of this ultra-low or negative yield environment that many issuers that would not normally consider these maturities will now be looking closely at the long end,” said a banker. “It is either that, or take the plunge and go negative.”

Deutsche Bank announced a mandate this afternoon for a Eu500m no-grow 12 year Pfandbrief, with leads Barclays, BMO, Deutsche Bank, Nordea and UBS. The deal is expected to be launched tomorrow, subject to market conditions.

The deal will be Deutsche’s third benchmark Pfandbrief of the year, following a Eu750m eight year in March and a Eu500m 10 year on 1 June.

Bankers expect more euro supply this week, with next week seen as a trickier window for issuance, given a UK bank holiday on Monday and the month-end on Wednesday.

“Covered bonds are certainly back from the beach,” added a syndicate official. “Seeing these trades, with solid demand and tightened spreads, we can take confidence that there is good demand in the market.”

Deutsche Pfandbriefbank (pbb) leads BayernLB, Commerzbank, Goldman Sachs, JP Morgan and Nomura launched the three year Reg S public sector Pfandbrief this morning with initial price thoughts of the 60bp over mid-swaps area. The deal has been re-offered at 60bp and the size fixed at $500m (Eu442m).

The deal is pbb’s first US dollar benchmark, and comes after a series of Eurodollar issues from German banks. MünchenerHyp sold a $600m three year on 12 July and BayernLB a $300m three year on 2 August, before Helaba on 9 August sold a $600m four year. The deals were priced at 48bp, 45bp, and 50bp over mid-swaps, respectively.

Bankers said pbb’s deal offered a pick-up versus the recent supply because its Pfandbriefe are lower rated. Deutsche Pfandbriefbank’s public sector Pfandbriefe are rated Aa1 by Moody’s, whereas all previous dollar Pfandbriefe this year have been rated triple-A.

ANZ New Zealand announced a mandate this morning for a European roadshow ahead of a potential mid-to-long term maturity euro benchmark covered bond. The roadshow will run from 5-9 September, visiting Germany, Amsterdam, Luxembourg and London. ANZ, BNP Paribas, DZ Bank and UBS have the mandate.

ANZ New Zealand’s last euro benchmark came in January 2015, when it sold a Eu750m 2022 issue. Fellow New Zealand issuers Westpac NZ and BNZ tapped the market this June, each selling Eu750m five year issues.