Sparebanken Vest sold a Eu500m seven year issue today (Tuesday) that was twice subscribed despite coming inside where some bankers saw fair value, with the Norwegian’s success attributed in part to demand for non-CBPP3 paper. Van Lanschot is set to sell a Eu500m 10 year tomorrow.

Non-Eurozone covered bonds have outperformed Eurozone equivalents so far this year, and Nordic issuers are among those to have benefited most from investors’ preference for deals outside of the reach of the ECB’s third covered bond purchase programme. Sparebanken Vest’s deal follows a Eu1bn five year issue for Danske yesterday (Monday), and bankers said the Eu1.6bn of orders for the Danish deal and demand for other recent CBPP3-ineligible trades confirmed investors’ preference.

After announcing a mandate yesterday (Monday) afternoon, Sparebanken Vest Boligkreditt leads Barclays, Credit Suisse, Nordea and UniCredit launched the Eu500m no-grow issue with guidance of the 6bp over mid-swaps area this morning. Guidance was then revised to the 4bp area with the books over Eu800m, before the deal was re-offered at 3bp on the back of over Eu1bn of orders.

“It is the flavour of the month,” said a syndicate banker away from the deal. “It is a non-Eurozone, non-French tainted, solid Scandi and medium term trade, and this is what people like right now.

“It seems quite a few investors are happy with this one, even if it is not the cheapest of trades.”

Bankers said it was difficult to calculate fair value for the new issue based on secondary levels. Seeing Sparebanken Vest’s April 2022s – its longest dated outstandings – quoted at 2bp, bid, some said the deal had been priced as much as 2bp inside fair value for a new seven year on Vest’s extrapolated curve. Others, citing mid levels and seeing the April 2022s at flat, said the deal had been priced flat to fair value.

Some also estimated that interpolated fair value for a new seven year for fellow Norwegian issuer DNB Boligkreditt would be around 3bp, and noted that Vest trades around 2bp wider than DNB in the five year part of the curve. They said this also suggested fair value was in the context of 5bp.

“Whichever way you look at it, it’s pretty aggressive pricing,” said one. “But it was clear when they started at 6bp for a Eu500m no-grow trade that they were focussing on price, and in the end it does not look like there was much price sensitivity in the book.”

Another banker away from the deal said, however, that it had been priced appropriately back from the most recent Norwegian supply. The deal is the third euro benchmark covered bond from Norway 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. Both were priced flat to mid-swaps.

“If you ignore secondaries and work back from where those two deals were priced, I think 3bp looks fair,” he said. “There probably isn’t much trading going on at the secondary levels anyway.”

The deal is Sparebanken Vest Boligkreditt’s first euro benchmark since last February, when it sold a Eu500m six year issue.

F van Lanschot Bankiers announced a mandate this afternoon for a Eu500m no-grow 10 year conditional pass-through (CPT) covered bond, via leads BNP Paribas, Credit Suisse, ING, LBBW and Rabobank.

The Dutch deal will be Van Lanschot’s third covered bond, with its last a Eu500m seven year issue in March 2016.