Nordea and BPCE set a new pricing template today (Wednesday), offering more generous starting premiums than previous trades for a EUR2bn dual-tranche, five and 15 year deal and an upsized EUR1bn 7.5 year, respectively, reaping the rewards with February’s biggest books.

Today’s Finnish and French deals came after two euro benchmark trades that were deemed by bankers to have experienced only modest receptions, a EUR500m eight year Pfandbrief for Berlin Hyp that attracted over EUR700m of orders but was priced in the middle of guidance on Monday, and a EUR500m seven year issue for Sparebanken Vest Boligkreditt yesterday (Tuesday) that drew EUR580m of demand and was priced 1bp inside the middle of guidance.

This came after wider recent market volatility and a reported increase in investor selectiveness since the turn of the year, and bankers said that the two issuers in the market today had adjusted their strategies accordingly.

“What was particularly interesting about both today’s trades was their starting points,” said a syndicate banker away from the deals. “Both looked more attractive with regards to concessions, so it looks like we might be seeing the start a slight repricing that has been necessary – especially after the last trades did not get a great reception from investors.”

Nordea Mortgage Bank leads Barclays, Credit Suisse, Deutsche Bank, Natixis and Nordea this morning launched the five year tranche with guidance of the mid-swaps minus 8bp area and the 15 year tranche with guidance of the mid-swaps plus 2bp area.

Guidance for the five year tranche was revised to the minus 10bp area, with books over EUR1.9bn, and guidance for the 15 year tranche revised to the mid-swaps flat area with books over EUR1.4bn. The spread of the five year tranche was ultimately fixed at minus 11bp and the size at EUR1.25bn, and the spread of the 15 year tranche at minus 1bp and the size at EUR750m.

The initial guidance of the five year issue was deemed to have offered a new issue premium of around 7bp, with the deal ultimately paying a premium of around 4bp. Bankers cited Nordea Mortgage Bank January 2022s at around minus 17bp, mid, and November 2023s at around minus 15bp.

Bankers said that fair value for the 15 year tranche is harder to calculate given the deal extends the issuer’s curve by six years. Some said the most appropriate comparable was an ABN Amro January 2033 issue, which was priced at 2bp and seen trading at around minus 1bp, mid, today. They noted that Nordea Mortgage Bank’s covered bonds trade slightly tighter than ABN Amro’s at the shorter end of the curve, and suggested the deal paid a final premium of around 2bp – having initially offered a premium of 5bp.

BPCE SFH announced a mandate yesterday for a euro benchmark obligations de financement de l’habitat issue with a seven-and-a-half year maturity, via leads Barclays, Crédit Agricole, Mediobanca, Natixis, Nykredit and UniCredit.

The leads launched the September 2025 deal this morning with an indicated size of EUR750m and guidance of the mid-swaps minus 5bp area. After around one and a half hours the leads announced that books were over EUR1bn.

Guidance was subsequently revised to the minus 7bp area, plus or minus 1bp will price within range, and the size set at EUR1bn with books over EUR1.3bn, excluding joint lead manager interest. The spread was ultimately fixed at minus 8bp with books over EUR1.6bn, excluding JLM interest.

The initial guidance was said by bankers to have offered a new issue premium of 7bp-8bp, and the deal was deemed to have paid a final premium of 4bp-5bp, with BPCE February 2025s seen at around minus 14bp, mid.

Bankers noted that today’s new issue premiums were higher than those earlier this week: yesterday’s Sparebanken Vest Boligkreditt deal was touted as offering a 5bp new issue concession versus the issuer’s secondaries with its initial guidance of the minus 4bp area, but some market participants noted that more recent comparables implied a slimmer premium, while Berlin Hyp’s deal paid a premium of 2bp-3bp at its spread of minus 15bp.

They said that given the demand both today’s deals received, other issuers are likely to follow suit.

“The outcome of the deals prove it was clearly the right approach,” said a syndicate banker away from the leads. “It is good that you can get the benefit in terms of dynamics by adjusting the pricing strategy, and we can take comfort from these deals.

“I think it would be very natural for other issuers to follow this template. You could argue whether you would need to take this approach for a EUR500m no-grow trade, but these issuers have set a new reference, and it would be very difficult for another issuer to not take this into consideration.”

Another syndicate banker agreed, noting that the deals attracted the biggest books in the covered bond market this month.

“Nordea got well over EUR2bn of combined demand and BPCE were able to upsize their deal while still tightening the spread,” he said. “You can’t argue with that.”

Syndicate bankers at BPCE’s and Nordea’s leads noted that the final premiums paid by the deals were in line with those paid by some deals earlier in the year, but agreed the starting levels were more generous than those of previous trades.

Some bankers also questioned how relevant secondary levels were for the pricing of the deals, suggesting that the spreads of previous new issues were a more useful guide.

Nordea’s new issue is the first benchmark Finnish covered bond of the year, with the last a EUR1bn long five year for OP Mortgage Bank on 15 November. Nordea Mortgage Bank’s last benchmark issuance was a EUR1.5bn five year in January 2017.

It is the biggest deal in the euro covered bond market since 3 January, when ABN Amro priced a EUR2bn single-tranche 15 year.

“I like the approach of going for a dual-tranche deal with two distinct maturities – rather than the five and 10 year or eight and 12 year combination that you see sometimes,” added a syndicate banker away from the leads. “It ensures there is no cannibalisation.”

BPCE’s deal is the eighth benchmark covered bond from France since the start of the year.

When announcing its results last Wednesday, Groupe BPCE said it aims to raise around EUR6.6bn of covered bond funding in 2018 – 30% of its total wholesale funding target. BPCE subsidiary Compagnie de Financement Foncier (CFF) sold a EUR1bn 10 year obligations foncières on 3 January.