OP Mortgage Bank took over Eu1.65bn of orders for a Eu1bn long five year deal today (Wednesday) even as it priced 11bp inside the last Finnish five year, showing covered bonds’ resilience to a wider weakening. Sparkasse Hannover and Valiant sold Eu250m and Sfr150m debuts, respectively.

In recent sessions, euro covered bond issues have all been comfortably oversubscribed and priced with little to no new issue concessions, but some markets have begun to show signs of weakness this week, with European stocks down 0.5%-0.75% this morning and senior and sub-ordinated indices continuing a widening trend.

Against this backdrop, OP Mortgage Bank leads Barclays, Crédit Agricole and OP this morning launched the February 2023 issue with guidance of the mid-swaps minus 9bp area. They later announced that books had exceeded Eu1.25bn, and subsequently set the spread at minus 13bp and the size at Eu1bn on the back of over Eu1.65bn of orders.

The new issue is understood to be the tightest benchmark covered bond from Finland to date, surpassing a Eu1bn long five year issue for Nordea that was priced at minus 10bp in March 2015.

“We seem to be setting spread records every day, but this is nonetheless a good price, both outright and in terms of the concession,” said a syndicate banker. “It is also a good result if you consider the weakening of the broader market backdrop, with higher beta markets continuing to widen while covered bond spreads in primary are unaffected.

“It shows the covered bond market remains isolated.”

Bankers noted that OP’s deal had attracted stronger demand than each of the three Eu500m covered bonds priced yesterday – for Aegon, Danske and DBS.

“That is to be expected, given that OP is a more established issuer than Aegon and unlike Danske and DBS has the support of CBPP3,” said a syndicate banker away from the deal. “They also will have been helped by relatively light Finnish supply this year.

The deal is only the fifth benchmark covered bond from Finland this year, and OP’s third. The issuers last benchmark was a Eu1bn 10 year in May, while the last from the country was a Eu500m straight five year for Sp Mortgage Bank, priced at minus 2bp on 17 October.

Bankers said OP’s deal was priced with around 1bp new issue premium, seeing Sp Mortgage Bank’s recent October 2022s at minus 7bp, mid, today and extrapolating fair value based on the differential between the issuers’ curves.

Sparkasse Hannover’s Eu250m no-grow 10 year mortgage Pfandbrief was priced by leads DekaBank, DZ and NordLB at 10bp through mid-swaps today, down from initial guidance of the minus 9bp area.

Bankers said the deal offered an attractive pick-up versus recent benchmark supply from more established German issuers.

The last 10 year benchmark from Germany, a Eu500m October 2027 issue for Deutsche Apotheker- und Ärtztebank, was priced at minus 13bp on 27 September and seen at around minus 16bp, mid, today. MünchenerHyp, Helaba and WL Bank all tapped benchmark 2027 issues by Eu250m in mid-October at spreads of minus 17bp, minus 18bp and minus 17bp, respectively.

Switzerland’s Valiant Bank was meanwhile in the market today with an inaugural covered bond. Leads BNP Paribas, Zürcher Kantonalbank and Valiant launched the Sfr150m December 2027 issue this morning with an indicated spread of mid-swaps plus 9bp-12bp and an indicated coupon of 0.375%.

The deal has been assigned a provisional Aaa rating by Moody’s.

As previously reported, the retail and SME bank announced plans to enter the covered bond market in November of last year, reviving issuance from individual Swiss banks.

After completing a European roadshow on Monday, Detusche Hypothekenbank this afternoon announced a mandate for a Eu500m no-grow green Pfandbrief with a six year maturity. A syndicate banker at one of leads ABN Amro, Crédit Agricole, DZ, NordLB and UniCredit said the deal will be launched tomorrow, subject to market conditions.