UBI Banca launched the biggest OBG in 18 months today (Monday), a Eu1.25bn 10 year that showed the strength of the long end, with Crédit Mutuel Arkéa proving similarly successful with a Eu500m 10 year. SR Bolgikreditt is expected in seven years tomorrow, with Swedbank and Aareal in sterling.

The long end had looked in favour after impressive trades for issuers from Caffil to Banco Santander Totta last week, and, according to a syndicate banker at one of UBI’s leads, this – particularly the Eu3.25bn of demand for the Portuguese deal – prompted the Italian to accelerate issuance plans and come to market at short notice.

Banca IMI, Barclays, Credit Suisse, LBBW, Natixis and Santander announced the 10 year benchmark this morning and went out with initial guidance of the 40bp over mid-swaps area. After books topped Eu1.7bn guidance was revised to 37bp, plus or minus 2bp will price within range, and a Eu1.25bn size was ultimately priced at 35bp over on the back of some Eu1.8bn of orders, excluding joint lead manager interest.

The lead banker said that this was flat to fair value, with UBI September 2026s at 32bp, mid, pre-announcement. He also referenced the A1/A Totta deal, which had tightened from 48bp on Tuesday to 36bp, saying that this argued in favour of UBI’s double-A rated deal needing little pick-up for the one year extension, even if UBI’s February 2025s were seen at 15bp. He added that coming 95bp through BTPs had also not proven an obstacle.

“We thought compressing the pricing would be doable,” he said, “and the only question was whether we would do Eu1bn or be able to reach Eu1.25bn.”

The lead banker contrasted UBI Banca’s reception with that encountered by Intesa Sanpaolo when it launched the last Italian 10 year benchmark, a Eu1bn deal at 38bp over mid-swaps on 31 May that was priced in the middle of guidance and only just subscribed.

“The biggest change is clearly that deals can be very comfortably priced at the long end,” he said, “with a lot of people now feeling that tapering will have only a minor effect on rates at the long end when it comes.”

He noted that UBI’s issue continued the trend of 10 year trades pricing roughly flat to or even through fair value. The pricing is also the tightest on an Italian benchmark in almost a year, with Cariparma having issued a Eu750m eight year on 5 October 2016, and the tightest Italian 10 year since UBI priced a Eu1bn 10 year at 19bp over on 5 September 2016.

“This shows once again how very supportive the market is.”

Crédit Mutuel Arkéa reaffirmed this, pricing its Eu500m no-grow 10 year at the tightest spread of any covered bond it has launched, 2bp through mid-swaps, with its first benchmark in two years.

“Timing could hardly be better for a return in primary,” said a syndicate banker at one of the French issuer’s leads. “This is exceptionally competitive pricing at record levels on the 10 year part of the curve.

“The level of granularity here is another evidence of the squeeze across the curve in covered bonds.”

The deal attracted some Eu1.6bn of demand at 2bp through after leads ABN Amro, Crédit Agricole, DZ, Crédit Mutuel Arkéa and Nykredit had gone out with initial guidance of 3bp-4bp over and then revised guidance of mid-swaps flat, plus or minus 2bp will price within range, when books surpassed Eu1.2bn.

The re-offer was deemed around 1bp through fair value. The pricing is the joint-tightest on a French 10 year covered bond in almost a year, matching the spread of a Eu750m issue for Caffil last Monday, with Crédit Agricole Public Sector SCF having issued a Eu500m 10 year at 7bp through mid-swaps on 21 October 2016.

A mandate for a Eu500m no-grow seven year euro benchmark for SR-Boligkreditt hit screens today and a deal is expected to follow tomorrow. Credit Suisse, HSBC, Nordea, NordLB and SG are leads.

Swedbank Hypotek priced a £250m tap of a £300m December 2021 fixed rate deal via sole lead HSBC at 57bp over the Gilt on the back of over £230m of demand.

Aareal Bank is expected to follow, having mandated Deutsche, Goldman Sachs and HSBC to lead a June 2020 fixed ate sterling benchmark mortgage Pfandbrief.