LBBW, CaixaBank and Caffil opened the euro covered bond market with the first deals of 2017 today (Tuesday), taking out chunky sizes to print an aggregate Eu4bn, with each deemed to have gone smoothly while paying slim premiums, although LBBW and Caixa set opposing pricing markers.

“It’s a good start,” said a syndicate banker away from today’s supply. “It is the usual pattern for the start of the year, which of course is traditionally liquid, but there are good signs.

“It is particularly notable that in terms of new issue premiums, none look very generous. It is encouraging that you do not need to offer loads of basis points to get a deal going, as you did at times at the end of last year.”

Landesbank Baden-Württemberg – which was one of the issuers to open the market in 2016 – was the first to announce a mandate for a euro covered bond in the new year, doing so yesterday (Monday) when the UK was still on a public holiday.

Leads Banca IMI, Crédit Agricole, HSBC, ING, LBBW and Société Générale then this morning launched the seven year Pfandbrief with guidance of the mid-swaps minus 7bp area, before moving to guidance of the minus 9bp area plus or minus 1bp will price within range, with books “well in excess of” Eu1.25bn. The spread was then fixed at minus 10bp and the size at Eu1bn with books at Eu1.7bn. The book closed at over Eu1.9bn.

“Personally, I think this is the finest, most solid of today’s deals,” said a banker away from the leads. “Minus 10bp for a Eu1bn-sized Pfandbrief is something we have not seen for a while.”

The new issue is the tightest priced benchmark covered bond with a size of Eu1bn or above since March 2016, when Helaba priced a Eu1bn November 2022 issue. Helaba’s deal was also the last Eu1bn or greater German Pfandbrief, with German issuers having since mostly preferred Eu500m deals.

“It’s an unusually chunky size for a Pfandbrief and it is quite an achievement,” said another syndicate banker.

Syndicate bankers said the deal offered little to no new issue premium, seeing fair value at around minus 10bp and citing LBBW’s outstandings in the six to eight year range trading at around 10bp, bid.

CaixaBank leads Barclays, BNP Paribas, CaixaBank, Crédit Agricole and UniCredit priced the 10 year cédulas hipotecarias at 60bp over mid-swaps on the back of books over Eu2bn, having launched the deal with guidance of the 65bp area. The size was ultimately fixed at Eu1.5bn with books in excess of Eu2.4bn.

“I was surprised to see a 10 year peripheral bond in amongst the first movers,” said a syndicate banker away from the leads. “It is not necessarily the sort of deal you’d expect, especially given that there were questions over BBVA’s 10 year in November, but this is a different market and it appears that Caixa was able to shrug this off.”

On 14 November, BBVA sold a 10 year cédulas that was priced in line with IPTs and barely subscribed, and the deal’s struggles were attributed to a lack of enthusiasm for long-dated and peripheral paper in what were volatile market conditions.

Some syndicate bankers said fair value for CaixaBank’s new issue was in the low 50s, based on the bid side of the issuer’s secondary levels.

Excluding an issue for Turkey’s VakıfBank, CaixaBank’s new issue is the widest-priced euro benchmark covered bond since March 2016, when Bankia priced a Eu1bn seven year at 82bp over mid-swaps.

Caisse Française de Financement Local (Caffil) leads BayernLB, BNP Paribas, Commerzbank, SG and UniCredit launched the 10 year French issue with guidance of the 12bp over mid-swaps area. The spread was then fixed at 8bp and the size at Eu1.5bn, with the book “well above” Eu1.8bn.

Seeing Caffil April 2026s at 5bp-6bp, bid, syndicate bankers away from the leads said the deal offered a new issue premium of around 2bp.

Caffil’s last benchmark covered bond came as recently as 23 November, when it sold a Eu500m 15 year issue, which was also the last benchmark out of France.

Bankers expect heavy supply to continue for the rest of the week, and said many issuers are preparing potential deals ahead of blackout periods later this month.

“It’s a short notice game,” said a syndicate banker. “We’ve had an encouraging start and I don’t think other issuers will hesitate to join in.”

Commerzbank announced a mandate today for an expected Eu500m tap to its Eu500m February 2023 mortgage Pfandbrief. A syndicate banker at one of leads Commerzbank, Danske, Deutsche, ING and Natixis said the deal will likely be launched tomorrow.

The original issue was priced at 12bp through mid-swaps on 16 November.