Lloyds and BNP Paribas Fortis stood from the crowd today (Thursday) with EUR1bn seven year and EUR750m 10 year issues, respectively, that took size out of a hectic market. PKO EUR500m long fives were deemed decent, while WL Bank EUR500m 10s were just subscribed.

With four benchmark issues on screens, today is the busiest day in the euro covered bond market since 16 January, when four issuers sold a combined EUR3.25bn. Other markets were similarly crowded, with CIBC, Goldman Sachs and ING active in the senior and Tier 2 markets, and syndicate bankers questioned markets’ capacity to handle the strain.

“Covereds are still OK – if you use the right approach, you can get a good deal, as we’ve seen today – but in other markets we’re really starting to feel the weight of supply,” said one. “Even in covereds, I wouldn’t have thought yesterday that this was the kind of market that would welcome four deals in one day.”

Lloyds Bank announced its euro benchmark seven year issue for an intraday execution this morning, and leads BBVA, ING, LBBW, Lloyds and SG opened books with guidance of the mid-swaps plus 4bp area.

The leads announced after around one and a half hours that books had surpassed EUR1bn. The spread was ultimately fixed at 1bp and the size at EUR1bn with books over EUR1.3bn.

“It’s a very good outcome, getting EUR1bn in this market while still tightening the spread by 3bp,” said a syndicate banker away from the leads.

The deal was deemed to have paid a new issue premium of around 4bp, with bankers citing Lloyds April 2023s at around minus 6bp, mid, and Santander UK January 2025s – the most recent euro benchmark from the UK, having been priced at minus 2bp in January – at around minus 3bp.

The new issue is Lloyds’ first euro benchmark covered bond since April 2016, and bankers said the rarity of the name in euros boosted demand.

“Some investors would also have liked that this is non-CBPP3-eligible, and obviously with the spread still in positive territory the price is not so distorted by the ECB,” added one.

BNP Paribas Fortis also announced its euro benchmark 10 year deal this morning, via leads ABN Amro, BNP Paribas, Danske Bank, ING, Santander and UniCredit. The mortgage Pandbrieven was launched with guidance of the mid-swaps flat area.

The size was later set at EUR750m and guidance revised to the minus 2bp area with books over EUR1bn. The deal was subsequently re-offered at minus 3bp with books over EUR1.2bn, pre-reconciliation.

“This is a strong deal in my opinion,” said a syndicate banker away from the deal. “Starting at flat and ending up at minus 3bp is a pretty good outcome for a EUR750m deal in this market.”

Demand was deemed to have been supported by the relatively scarcity of the name and Belgian paper, the new issue being only Fortis’ third benchmark covered bond.

The deal is the second benchmark Pandbrieven of the year, following a EUR750m eight year for KBC Bank on 1 March, which was priced 8bp through mid-swaps and quoted today at around re-offer.

Bankers said the deal paid a new issue premium of around 3bp, based on KBC’s spread and also citing BNP Paribas Fortis September 2024s at around minus 11bp, mid.

“The absolute spread was also important here, as Fortis are paying 10bp more than WL Bank in the same maturity and for the same rating – triple-A,” said one.

Following a mandate announcement yesterday (Wednesday) for a long five year euro benchmark, PKO Bank Hipoteczny leads BNP Paribas, HSBC, LBBW and PKO Bank Polski launched a EUR500m no-grow January 2024 issue this morning with guidance of the mid-swaps plus 26bp area.

Around one hour and 50 minutes later, the leads announced that books had surpassed EUR650m. The spread was subsequently fixed at 23bp with books approaching EUR850m.

“It isn’t such an eye-catching deal as Lloyds or Fortis, but it is still a decent outcome on a busy day and from a jurisdiction that probably isn’t still on all investors’ radars,” said a syndicate banker away from the deal. “It’s a nicely balanced deal.”

Bankers said the deal offered a new issue premium of around 3bp, seeing PKO June 2022s were at 15bp, mid, January 2023s at 16bp, and August 2024s at 21.5bp. They noted that the new January 2024 issue was priced slightly wider than the secondary level of the longer dated August 2024 issue, attributing this to the new issue premium.

Bankers said the absolute spread underpinned demand for the new issue, as the deal is the widest-priced investment grade euro benchmark covered bond since 16 January, when Banco BPM priced a EUR750m seven year at 40bp.

PKO’s covered bonds are rated Aa3, with the rating capped at the country ceiling.

Westfälische Landschaft Bodenkreditbank (WL Bank) announced yesterday afternoon that it had mandated BayernLB, Commerzbank, DZ, LBBW and UBS for its EUR500m no-grow 10 year mortgage Pfandbrief.

The deal was launched at 9:00 CET this morning with guidance of the mid-swaps minus 13bp area. At 10:35, the spread was set at minus 13bp. Books closed at 11:45, and the size of the order book was not disclosed. It is understood that the deal was marginally subscribed.

Some bankers away from the leads suggested WL Bank’s starting point had been too tight, given that Helaba on Tuesday launched a EUR500m 10 year issue with guidance of the mid-swaps minus 12bp area, ultimately pricing at minus 14bp. They said there is not a substantial differential between the curves of WL Bank and Helaba.

“I was surprised by the start,” said a syndicate banker away from the leads. “Investors gave a clear sign that they thought minus 13bp was too tight, and that it would stay at minus 13bp.

“With three other covered bonds in the market, if you lose the attention of investors at the start, it is difficult to get it back.”

Helaba’s new March 2028 issue was seen trading at minus 15bp, mid, today.

The final spread of minus 13bp was seen as incorporating a new issue premium of around 4bp versus the issuer’s curve, with WL Bank February 2026s, August 2026s and April 2027s all seen at minus 19bp, mid, and August 2027s at minus 18bp.

Deutsche Hypothekenbank today priced a £325m (EUR367m) three year FRN at 27bp over three month Libor, following a mandate announcement this afternoon. Leads Deutsche Bank, HSBC, JP Morgan and Toronto-Dominion had launched the Pfandbrief with guidance of the three month Libor plus 28bp area this morning.

The last benchmark sterling Pfandbrief was a £450m three year for Deutsche Pfandbriefbank that was priced at 63bp over mid-swaps in November.