An “ambitious” Eu1bn seven year issue for Santander UK was deemed a positive sign for UK issuers today (Thursday), while a dual-tranche, Eu1.75bn Westpac deal attracted “granular” demand and Cariparma priced a rare 20 year, upon more modest orders, in a market showing signs of softness.

While today’s deals were deemed successes to varying degrees, some syndicate bankers noted that all three had progressed relatively slowly, with books closing at least three hours after launch. The new supply came after new year euro deals totalling Eu5.375bn for LBBW on Tuesday and ABN Amro, CaixaBank and CFF yesterday (Wednesday), of which only the latter experienced modest demand.

“The market feels sluggish, which is slightly surprising,” said one. “Normally January is the easiest time to sell bank bonds, but currently all books take about three hours to develop, they are protracted processes, and spreads are not tightened by huge amounts.

“There is less excitement in the market than in autumn 2017.”

This was attributed by some bankers to the volume of competing supply on offer.

“The market is definitely softer, and we felt that today,” said a syndicate banker working on one of today’s trades. “There is some investor sensitivity, and given all the supply in the pipeline they can be a bit more selective.”

Another syndicate banker suggested that broader market sentiment was being negatively affected by investor speculation on the scale of the ECB’s asset purchases across markets, noting that European government bond yields had widened this week on the back of such concerns.

“Some people seem to be assuming that market conditions are going to get worse,” he said. “If enough people think that conditions are going to get worse, then they will get worse.”

Santander UK leads BNP Paribas, Commerzbank, NatWest, Santander and UniCredit launched the seven year euro benchmark with guidance of the mid-swaps plus 2bp area. The leads announced that books had exceeded Eu1bn, and subsequently revised guidance to the minus 1bp area and set the size at Eu1bn on the back of Eu1.4bn of orders. The spread was later set at minus 2bp.

“Gunning for minus 2bp while also taking the Eu1bn size, on the back of a Eu1.4bn book, was an ambitious move,” said a syndicate banker away from the deal.

Bankers said the deal paid a new issue premium of around 4bp, seeing Santander UK September 2024s at around minus 7bp, mid.

The deal is the first euro benchmark covered bond from the UK since June 2017, and Santander UK’s first benchmark in the currency since February 2016. UK issuers had in the latter half of last year focussed any benchmark covered bond funding in the sterling market, while issuance from the UK had been limited overall. An upturn in UK issuance, in both euros and sterling, is expected following the conclusion of the Bank of England’s Term Funding Scheme.

“It is interesting that Santander UK found around the same demand for its seven year as Westpac, even though its deal was tighter,” said a syndicate banker. “That probably reflects the name but also the recent rarity of the jurisdiction in this currency.

“It’s a good sign for UK issuers that might be looking into the covered bond market this year.”

Westpac announced a mandate yesterday for a euro benchmark dual-tranche, seven and 15 year covered bond issue.

Leads BNP Paribas, Deutsche, JP Morgan, UBS and Westpac launched the seven year tranche with guidance of the 5bp over mid-swaps area and the 15 year tranche with guidance of the 13bp area. The leads then set the spreads at 2bp and 10bp, respectively, upon books of Eu1.4bn and Eu750m, respectively, without revising guidance.

The size of the seven year tranche was fixed at Eu1.25bn, upon a final book of over Eu1.5bn, and the 15 year at Eu500m, upon around Eu700m of orders.

“It’s gone really well,” said a syndicate banker at one of the leads. “We got a 3bp move in both tranches, and there is very good granularity, especially in the seven year, but both order books were very strong.”

Both tranches were deemed to have offered new issue premiums of around 4bp, with bankers citing Westpac May 2024s at around minus 2bp, mid, and Westpac May 2032s at around 5bp.

Crédit Agricole Cariparma announced yesterday morning that it had mandated Banca IMI, CaixaBank, Crédit Agricole and Natixis to lead a Eu500m no-grow 20 year obbligazioni bancarie garantite (OBG) issue.

The deal was launched this morning with guidance of the low 40s over mid-swaps area. The spread was ultimately set at the 40bp area, on the back of books “well above” Eu600m.

The deal is the first new benchmark 20 year covered bond since Cariparma parent Crédit Agricole issued a Eu500m 20 year in January 2017, as part of a three-tranche issue, now seen trading at 3bp, mid.

“A 20 year OBG is not for everyone, which explains why the demand was not as large as today’s other trades,” said a syndicate banker away from the leads. “But for those that do buy this kind of duration, I’m sure the rarity of a 20 year OBG was attractive.”

Cariparma September 2031s, the Italian subsidiary’s longest dated outstanding OBGs, were seen at 20bp, mid, pre-announcement. Taking into account the differential between Cariparma’s OBGs and the curve of parent Crédit Agricole, syndicate bankers away from the deal estimated that the deal offered a new issue premium of around 7bp.

Cariparma was the last Italian issuer to sell a benchmark OBG, having issued a Eu750m long eight year on 4 December.