Rabobank, Sparebanken Sør and Banco Commercial Português are expected to provide a welcome boost to a disappointed covered bond market next week. Sparebanken Sør today (Friday) announced an imminent Eu500m five year and expectations are high for Rabobank’s debut.

A Eu500m seven year Pfandbrief for Hamburger Sparkasse on Tuesday was the only euro benchmark covered bond supply this week, representing a substantial slowdown from last week, which, with Eu5.25bn, was the busiest week since January.

The decline came against a turbulent backdrop, with volatility in equities and the spreads of higher beta asset classes peaking yesterday on the back of political concerns in the US, with speculation growing about the possibility of president Donald Trump being impeached.

“It was really tough yesterday in the higher beta markets, but today it looks calm, like the sea after a storm,” said a syndicate banker. “It is almost like yesterday never happened, which is strange.

“As an issuer said to me this morning, we got shaken, but not hurt.”

Covered bond spreads were unmoved, however, with most recent deals trading at or inside re-offer, and bankers said other factors were to blame for the low volume of issuance.

“It’s possible the rough ride in wider markets could have persuaded one or two issuers to hold off, but I don’t think that is why we had a quiet week,” said a syndicate banker. “It is just a quirk of scheduling.

“The issuers in the pipeline all had roadshows to do and were not ready to come to market.”

Sparebanken Sør Boligkreditt and its leads Commerzbank, Danske, LBBW, Nordea and UniCredit have been on the road this week marketing a Eu500m no-grow covered bond with a medium term maturity.

The roadshow will conclude today, and the Norwegian issuer announced this morning that it will launch a five year issue early next week, subject to market conditions.

The deal will be Sparebanken Sør’s second euro benchmark covered bond, following a Eu500m five year in March 2016.

Syndicate bankers at the leads saw the Sparebanken Sør March 2021s at minus 1bp, mid. They also saw Sparebanken Vest March 2021s at minus 6bp and April 2022s at minus 4.5bp, and Eika Boligkreditt March 2021s at minus 5.5bp, October 2021s at minus 5bp, and January 2023s at minus 2bp.

Rabobank and Banco Commercial Português will also complete roadshows today, the former marketing a debut euro benchmark covered bond with an intermediate and/or longer maturity and the latter a euro benchmark obrigações hipotecárias that would be its first since 2009. Both are expected to come to market next week.

“As a result, investors might be able to choose from different flavours next week: a strong name from a core country, a non-CBPP3 deal, as well as a comeback of a peripheral bank,” said Joost Beaumont, senior fixed income strategist at ABN Amro.

Rabobank’s covered bond debut has been awaited since the Dutch bank in December announced it had started the process of registering a covered bond programme.

A banker away from the deal suggested Rabobank’s covered bonds should be priced inside those of established issuer ABN Amro, due to the bank’s higher rating. Rabobank used to be triple-A rated, and is still the highest rated Dutch bank, currently Aa2/A+/AA-/AA (Moody’s/S&P/Fitch/DBRS). ABN Amro is rated A1/A/A+/A (high).

“I think that’s what they’ll definitely try to do and I think they will,” he said. “Just by virtue of the fact that they are highly rated and because they used to be triple-A – even though this is their first deal they have a lot of former SSA buyers and accounts in Asia who used to buy them in size, and will still have them.

“So they will benefit from a lot of that demand, and diversification of name is a hard thing to get these days. I think it’s going to go very well.”

A syndicate banker agreed.

“This trade is very highly anticipated,” he said. “Investors will really appreciate the Rabobank name.”

An official at Rabobank told The CBR prior to the roadshow that the issuer was open to printing a dual tranche, depending on investor feedback, and a banker away from the leads said he expects Rabobank to issue both tranches, noting that longer dated issuance makes sense for the bank for asset-liability management reasons, but adding that it will also likely issue a shorter dated tranche to help get the best possible price when establishing a curve.

The window for issuance next week will likely be limited to Monday to Wednesday, with Thursday a public holiday in some parts of Europe and no issuance expected on Friday. The following Monday (29 May) is a bank holiday in the UK.

“After the first half of next week it will probably be quiet in terms of supply, so you would expect the issuers that are at the front of the pipeline to move quickly,” said a syndicate banker.