DNB Boligkreditt attracted Eu2bn of orders to a Eu1.5bn 10 year covered bond today (Tuesday) that is the largest issue in the maturity since 2014. Debutant RLB OÖ meanwhile mandated a roadshow as the market got off to a slower start after a “frenzy” of issuance last week.

Some Eu3.75bn of euro benchmark covered supply was sold last week, across five deals between Monday and Wednesday, as the market reopened after a month-long summer lull. No new issuance emerged yesterday (Monday), with the UK having a public holiday, and DNB Boligkreditt was the only issuer to enter the covered bond market this morning.

“There is quite a queue, with a few issuers going on the road, but most are medium term projects and there is not a frenzy like last week,” said a syndicate official. “I expect there’ll be more, but it’s quite civilised and issuers are not stumbling over each other to get into the market.”

After announcing a mandate yesterday, DNB Boligkreditt leads BNP Paribas, HSBC, JP Morgan and UniCredit launched the 10 year issue this morning with guidance of the 7bp over mid-swaps area. Guidance was then revised to the 5bp area, before the deal was re-offered at 3bp and the size fixed at Eu1.5bn, with the book closing at Eu2bn.

The deal is the largest 10 year euro covered bond since November 2014, when Santander sold a Eu1.75bn 10 year as part of a Eu3bn dual-tranche issue alongside a 20 year.

“DNB traditionally like to take size, but the investor base is a slightly different one at the long end of the curve,” said a syndicate official away from the deal. “To get Eu1.5bn with a 10 year is a good result.”

The deal is DNB’s third euro benchmark covered bond of the year, following a Eu1.5bn five year in January and a Eu1.5bn seven year in April. It is also DNBs’ first 10 year benchmark since 2012, when it sold two deals, a Eu1bn and a Eu2bn, with the maturity.

Some syndicate officials away from the deal suggested that DNB’s leads could have opened the books with a tighter initial spread, noting that a Eu1bn 10 year for fellow Norwegian issuer SpareBank 1 Boligkreditt was last Tuesday priced at 4bp over mid-swaps, down from initial guidance of the 8bp area. The deal was seen trading at 2bp, mid, pre-announcement.

“I think given where SpareBank 1 came, DNB could have started a bit tighter,” said a syndicate official away from the deal. “But it’s clearly not had a negative impact on the outcome.”

Bankers noted that DNB Boligkreditt covered bonds currently trade around 2bp tighter than SpareBank 1’s curve, suggesting fair value for DNB’s new issue was flat to mid-swaps. The differential between the two issuers is usually larger, bankers added, but has tightened on the back of recent spread compression across the covered bond market.

“DNB are the national champion in Norway, so that makes sense,” said a syndicate official.

Raiffeisenlandesbank Oberösterreich (RLB OÖ) yesterday announced a mandate for a series of European investor meetings ahead of a potential euro benchmark mortgage covered bond with a medium-to-long maturity. The roadshow runs from Wednesday of next week (7 September) until 15 September.

The deal will be RLB OÖ’s first benchmark covered bond. The Austrian issuer has previously sold covered bonds, but without a rating. Moody’s on 7 July assigned a provisional Aaa rating to mortgage-backed covered bonds issued by RLB OÖ. It rates the Austrian issuer Baa2, on stable outlook.

Bankers noted that Moody’s raised its outlook on Austria’s banking system from negative to stable on Monday of last week (23 August). Moody’s said the rating action reflected improvements in the banks’ credit fundamentals on the back of falling exposures to higher risk Central and Eastern Europe (CEE) countries and stronger than expected capital buffers.

“The Austrian banks have faced a lot of headwinds, but changes have been made, their ratios and recent earnings are generally better, and they are much more stable than in the past,” said a syndicate official at one of RLB OÖ’s leads. “There is of course still the Heta story, but I think mostly this is a thing of the past now.

“While some investors might still have questions, I don’t really expect this to be a problem, and RLB Oberösterreich should do well.”

The last benchmark covered bond from Austria was a Eu500m six year issue for Bawag PSK in February.

Also in the pipeline are euro issues from ANZ New Zealand – which is holding a roadshow from next Monday to Friday (5-9 September) ahead of a potential benchmark – and Natixis Pfandbriefbank, which on Tuesday of last week announced a mandate for investor meetings ahead of a potential Eu250m mortgage Pfandbrief.

Bank of Queensland yesterday also announced a mandate for investor meetings to discuss a potential covered bond programme (see separate article).

Photo: DNB/Johan Stub