Belfius took Eu1.25bn of orders for a Eu1bn 10 year Pandbrieven today (Wednesday), benefitting from summer spread compression to price at a level deemed impressively close to other, core Eurozone issuers, while Natixis Pfandbriefbank offered an attractive pick-up with a Eu250m 10 year.

Belfius’ new issue is the third benchmark covered bond from Belgium this year, with the last a Eu500m six year issue for Belfius in March. KBC Bank sold the other, a Eu1.25bn six year, in February, and both deals were considered to have attracted impressive demand on the back of offering substantial premiums versus comparable trades from core Eurozone, CBPP3-elgible jurisdictions.

After announcing a mandate yesterday (Tuesday) afternoon, Belfius Bank leads Belfius, Citi, Deutsche, Nomura and RBS launched the Eu500m no-grow 10 year public sector Pandbrieven this morning with guidance of the 2bp through mid-swaps area, before revising guidance to the minus 4bp area on the back of around Eu1bn of orders. The deal was then re-offered at minus 6bp, with the books at around Eu1.25bn.

“We’re very happy with this one,” said a syndicate official at one of the leads. “The key takeaway for us is the quality of the order book compared with some of the other covereds we’ve seen recently – with very strong participation from a nice selection of asset managers and real money accounts, as well as bank treasuries.”

Bankers at and away from the leads also noted that the deal had been priced inside a Eu1bn 10 year obligations foncières issue for CFF, which was priced at minus 5bp on Monday and seen trading at minus 6bp, mid, this morning. They said that although Belfius’ deal was half the size, this represented a good result given that Belgian covered bonds have typically been priced much further back from those of French peers.

“Obviously the Eu500m no-grow size helped, but it is a fairly aggressively priced trade,” said the lead syndicate official. “But certainly it’s nice to see a deal from this jurisdiction being priced 1bp tighter than CFF.”

Bankers said this narrowing of the differential between Belgian and core European, CBPP3-eligible countries had been made possible by the tightening of covered bond spreads across all jurisdictions through the summer.

“Everything apart from the Germans and the non-Eurozone issuers has almost been compressed to a pan-European spread, so it is not surprising to see the Belgians coming at such levels,” said a syndicate official. “Given the structural imbalance between supply and demand, this is expected.”

Syndicate officials said the deal offered a new issue premium of 3bp-4bp, seeing Belfius’ mortgage-backed February 2025s – the issuer’s longest-dated outstanding – at minus 10bp, mid.

The deal is the first public sector benchmark issue from Belfius since November 2014, when it sold a Eu500m November 2019 issue, and only its third overall. Syndicate officials said there did not appear to be a substantial pricing differential between Belfius’ mortgage backed and public sector issuance.

“In terms of comparables, we didn’t differentiate between the programmes, and certainly when speaking to accounts we didn’t get any pushback or questions about the pricing benefits of certain pools,” added a syndicate official at one of the leads. “From our standpoint and from an investor standpoint they were seen similarly.”

After holding investor meetings in Germany last week, Natixis Pfandbriefbank announced a mandate for its 10 year mortgage Pfandbrief yesterday afternoon.

Leads DZ Bank, Natixis and NordLB launched the Eu250m no-grow deal this morning with guidance of the 5bp through mid-swaps area, before re-offering the deal at 6bp through on the back of books approaching Eu300m. The deal was priced at 99.847 with a coupon of 0.175%, to yield 0.1905%.

“It went more or less in line with expectations,” said a syndicate official at one of the leads. “Deals of this size are not for everyone, and after having communicated that this would not be one euro more than Eu250m, I think we had all of the accounts looking into the deal that we would have hoped for.”

Bankers at and away from the leads said the deal offered an attractive premium of around 10bp versus recent 10 year Pfandbriefe from more established issuers, with 2026 benchmarks from BayernLB, MünchenerHyp, Deutsche, WL Bank and Commerzbank seen at minus 18bp-16bp, mid.

“You expect that sort of newcomer entry fee for a new issuer like this – which has been active in private placements but not in visible format – and I think the premium also compensated investors for the smaller size,” said the syndicate official.

Natixis Pfandbriefbank has so far issued only private placements since it began operations in January 2013, with its largest deals to date two Eu100m issues.