Eika Boligkreditt sold a Eu500m seven year issue today (Thursday) that offered no premium versus its curve, although demand was more modest than for a tighter seven year for Sparebanken Vest on Tuesday, with accounts seen selective after tightening in the well supplied Norwegian segment.

After announcing a mandate yesterday (Wednesday) afternoon, Eika Boligkreditt leads Commerzbank, Crédit Agricole, Deutsche and Nordea launched the Eu500m no-grow issue with guidance of the 8bp over mid-swaps area. After one hour, the leads announced that orders had exceeded Eu500m, with guidance unchanged.

When books passed Eu600m, guidance was revised to the 7bp area, plus or minus 1bp, will price within range, before the spread was fixed at 6bp.

Eika’s new issue follows a Eu500m seven year for fellow Norwegian Sparebanken Vest Boligkreditt, which was on Tuesday priced at 3bp on the back of over Eu1bn of orders. It was seen trading at 1bp, mid, before Eika’s deal was announced yesterday. Bankers noted that Eika’s covered bonds, which are rated Aa1, trade 4bp-7bp wider than those of Sparebanken Vest, which are rated Aaa, and other, more frequent Norwegian issuers.

“At first glance I thought the 8bp guidance seemed quite tight to where Sparebanken Vest started, as it suggested that given the usual amount of tightening they would be coming pretty close to Vest’s landing point,” said a syndicate banker away from the leads. “But the strong performance in that deal from their better rated peer must have been part of Eika’s thinking, and the 8bp guidance and 6bp final spread look better in that context.”

Eika’s new issue offered no new issue premium versus the issuer’s own curve, bankers said, citing January 2023s at 3bp, mid, and April 2023s – Eika’s longest dated outstanding – at 5bp.

“That is quite enjoyable if you compare this to other covered bond jurisdictions where you have to pay up quite a bit right now because of underlying factors,” said the lead syndicate banker. “But at the same time the spread still offers an attractive pick-up versus Sparebanken Vest’s transaction.

“The level of that deal offered quite a bit of comfort in terms of where we thought the starting point should be.”

With the book last reported at over Eu600m, Eika’s deal attracted the lowest demand of any of this week’s benchmark covered bonds, with the other three all attracting at least Eu1bn of orders. Some bankers suggested demand was limited because of the slim new issue premium versus Eika’s secondaries, and others suggested that some fatigue may be setting in after relatively high issuance out of Norway.

The deal is the fourth euro benchmark Norwegian covered bond this year, following five years for DNB Boligkreditt and SpareBank 1 Boligkreditt, a Eu2bn issue on 4 January and a Eu1bn issue on 18 January, respectively.

The lead syndicate banker said the deal suffered slightly from investors becoming more selective on the back of the recent supply, with investors preferring more frequent issuers.

“Eika are a bit of an outlier in Norway,” he said. “It is not so much that they have the double-A covered bond rating, but the fact they are an unrated issuer also prevented some accounts from coming into the transaction.

“There was also a bit of concern from some investors that overall the Nordic covered bond complex is becoming quite expensive, and now there is – if not fatigue – a bit of a sense that investors are becoming more selective, especially when it is a relatively small issuer that does not come to the market very often.”

Eika has in recent years come to the covered bond market with one euro benchmark per year.

Norwegian covered bonds have tightened by around 3bp since the start of the year, in line with other non-Eurozone Nordic markets, as investors have sought paper outside the reach of the ECB’s covered bond purchase programme.

“Performance in the bonds will remain supported by the Eu5.75bn redemption payments made in Norwegian covered bonds in the first half of 2017, of which Eika Boligkreditt repaid Eu500m in January this year,” said Maureen Schuller, head of financials research at ING. “The issuer has another Eu1bn falling due in November.”