A EUR500m five year covered bond for Sparebanken Sør Boligkreditt today (Tuesday) was deemed a source of encouragement after last week’s wider turbulence, attracting over EUR800m of orders with only a slim premium – albeit at an attractive pick-up versus its peers.

Almost halfway through February, the Norwegian issuer’s deal is only the third euro benchmark covered bond of the month, and is the first in a week, following a EUR500m seven year Pfandbrief for Germany’s apoBank last Tuesday.

Volatility in equity markets last week did not hinder the execution of apoBank’s trade, nor new bond issues in other markets, but still persuaded other issuers to hold back. Banks’ blackout periods and the celebration of Carnival in some parts of Germany also kept the market quiet, until Sparebanken Sør Boligkreditt announced a mandate yesterday morning for its EUR500m no-grow issue.

“Every year there is a lot of focus on Carnival and possible disruptions for that, but if you get it right with the announcement and the investor work, then it’s not a problem,” said a syndicate banker at one of the leads. “This was the right sort of name and definitely the right maturity, so we were confident.

“In the end it’s a very decent outcome in the market environment, especially given that we haven’t seen much supply since the equity wobble.”

Leads Danske, DZ, LBBW, Nordea and UniCredit launched the deal this morning with guidance of the mid-swaps minus 2bp area this morning, After around 45 minutes, the leads announced that books were well above EUR500m.

Guidance was subsequently revised to the minus 4bp area, plus or minus 1bp will price within range, with books above EUR900m, including EUR30m joint lead manager interest. The spread was then fixed at minus 5bp with the post-reconciliation allocatable book over EUR800m.

“The bookbuilding was very fast and we were really pleasantly surprised with a book that at one stage was close to EUR1bn and that closed north of EUR800m at minus 5bp,” said the lead syndicate banker.

The deal is the Norwegian issuer’s third euro benchmark covered bond, following a EUR500m five year debut in March 2016 and another EUR500m five year in May 2017.

Bankers at and away from the leads said the deal offered a new issue premium of around 1bp versus the issuer’s curve, seeing Sparebanken Sør Boligkreditt March 2021s at minus 8bp and May 2022s at minus 7bp, mid, pre-announcement.

The deal is the third euro benchmark covered bond from Norway since the turn of the year, following a EUR1.5bn five year issue for DNB Boligkreditt on 16 January and a EUR1bn seven year green issue for SpareBank 1 Boligkreditt on 23 January.

Bankers saw DNB Boligkreditt January 2023s – the recent five year, which was priced at minus 10bp – at around minus 11bp, mid, this morning. They also cited as comparables DNB Boligkreditt April 2023s at minus 11.5bp, SpareBank 1 Boligkreditt March 2023s and Eika Boligkreditt April 2023s both at minus 9.5bp, and SR Bank Boligkreditt January 2023s at minus 8bp.

Bankers noted that Sparebanken Sør’s covered bonds continue to trade wider than DNB Boligkreditt and its other more established compatriots across the curve, reflecting that it remains a relatively new issuer.

“Hence, we see scope for some further spread convergence for Sparebanken Sør Boligkreditt’s covered bonds as the issuer’s covered bond curve further expands,” said Maureen Schuller, head of financials research at ING.

The lead syndicate banker said the pick-up to DNB was “justifiable”, and supported demand for the trade.

At the time The CBR went to press, no further benchmark covered bonds had been announced for imminent execution, but syndicate bankers are confident that more will follow Sparebanken Sør in tapping the market over the coming days.

“Certainly there are more to come,” said a syndicate banker. “What we are finding right now is that the market is not plain sailing, like last year, and that it is more of a windows market.

“You have to find a couple of days stability and choose the right product, but there is still a lot of cash around.”

At the start of February, syndicate bankers and analysts expected some EUR8bn-EUR10bn of euro benchmark covered bond supply this month. Following today’s deal, supply stands at EUR1.75bn.