Axa, HSBC and Erste achieved varying degrees of success via cautiously-priced covered bonds today (Tuesday), with Axa’s dual-tranche, EUR1.25bn seven and 15 year deemed the “shiniest” result, with EUR1.8bn of orders. SCBC and OCBC are set to follow tomorrow.

With three euro benchmark covered bonds on screens and deals in other asset classes also out – among them green senior issues for Berlin Hyp and BNP Paribas and an eight year benchmark for EFSF – bankers said the market was not easy to navigate today, despite relatively benign broader conditions. However, they noted that each of the three issuers were able to achieve success – albeit to varying degrees – by following the market’s new pricing requirements.

“There are mixed messages today,” said a syndicate banker that worked on one of the three deals. “Markets look good in general – equities are going up and rates are relatively stable – but in reality, looking at how deals are doing and how books are building, there is a degree of fatigue, especially when volumes are big in primary.

“Therefore you have to be careful as an issuer, and the key here is that at least from the outset you have to show a bit of value. As long as you are not in a rush and give the book a bit of time to build, there is still room for a decent outcome, as we have seen today.”

Axa Bank Europe SCF leads Commerzbank, Crédit Agricole, ING, Natixis, SG and UniCredit launched a EUR750m no-grow seven year tranche with guidance of the mid-swaps flat area this morning and a EUR500m no-grow 15 year tranche with guidance of the 14bp area. The leads later announced that combined books had surpassed EUR1.25bn, excluding joint lead manager interest.

Guidance for the seven year tranche was subsequently revised to the minus 2bp area, plus or minus 1bp will price within range, and for the 15 year to the plus 12bp area, plus or minus 2bp will price within range, on the back of combined books of over EUR1.8bn, excluding joint lead manager interest.

The seven year tranche was then priced at minus 3bp and the 15 year at plus 10bp with the combined book at over EUR1.9bn, pre-reconciliation, with orders said by the leads to be equally split between the two tranches.

A syndicate banker away from the leads described the deal as “the shiniest” of the day.

“It was particularly surprising to me that the 15 year seemed to do better than the seven year,” said a syndicate banker away from the leads. “4bp tightening for the 15 year was a fairly remarkable achievement.”

Bankers noted that demand is usually skewed towards the shorter tranche of such dual-tranche trades, with the evenly split book today showing that demand remains strong at the long end, after a EUR1.25bn 20 year issue for ABN Amro impressed last Wednesday.

“This shows that these longer maturities go well and there is still a good opportunity for issuers to get duration,” added a syndicate banker away from the leads.

Bankers said the seven year tranche paid a new issue premium of around 4bp-5bp based on the last French benchmark in the seven year part of the curve, a EUR1bn September 2025 issue for BPCE that was priced at minus 8bp on 21 February and seen at around minus 7bp today.

Syndicate bankers have suggested that for new issues, fair value is now best calculated using the spreads of more recent supply rather than an issuer’s squeezed secondary curve.

Fair value for the 15 year tranche was deemed more difficult to determine, but bankers noted it offered a pick-up over ABN Amro’s 20 year last week, which was priced at 8bp and seen trading at around 7bp today.

HSBC SFH (France)’s seven year deal was launched with guidance of the mid-swaps minus 5bp area this morning. After around one hour and 40 minutes, the leads announced they had taken more than EUR1bn of orders, and the spread was subsequently set at minus 7bp. The size was later set at EUR1bn with the book over EUR1.1bn good at reoffer.

ABN Amro, Banca IMI, CIBC, HSBC, LBBW, Lloyds, Santander, SG and Swedbank were leads.

Some syndicate bankers away from the deal highlighted that the level of oversubscription was relatively slim, suggesting this would limit the deal’s performance potential, but noted that the issuer had clearly opted to take the EUR1bn size.

A syndicate banker at one of the leads said the deal had gone well amid challenging conditions.

“The blow-out books we used to see are probably old-fashioned now – I don’t think we will see them in the foreseeable future,” he said. “But this is still a very nice and decent trade at a tight level and with a good volume.”

Bankers noted that the deal offered a double-digit pick-up over HSBC’s secondaries, with syndicate bankers at the leads seeing HSBC SFH March 2022s at minus 22bp, mid, and October 2023s at 20bp, but said such comparables were of limited use.

A syndicate banker at one of the leads calculated that the deal offered a new issue premium of around 7bp based on the spreads of recent French supply. A banker away from the leads added the final spread looked impressive when compared to the BPCE September 2025s seen at minus 7bp-6bp.

The new issue is the first benchmark covered bond from the UK-headquartered HSBC group since HSBC SFH issued a EUR1bn five year in March 2015. Its last UK covered bond matured last year, although, as previously reported, the group is going through the regulatory process to set up a Canadian covered bond programme.

Erste Group Bank leads BayernLB, Danske Bank, Erste, Helaba and Natixis launched the Austrian eight year issue with guidance of the mid-swaps minus 1bp area this morning. After around one hour and 40 minutes, the leads announced that books had surpassed EUR750m, excluding joint lead manager interest.

The spread was subsequently set at minus 3bp with books over EUR850m, including EUR20m joint lead manager interest. The size was later set at EUR750m with final books in excess of EUR950m.

The deal was deemed to have paid a new issue premium of around 7bp versus the issuer’s curve, with Erste January 2023s at minus 12bp, mid, February 2025s at minus 11bp, January 2027s at minus 9bp and January 2028s – its most recent benchmark, having been priced at minus 6bp in January – at minus 8bp.

Bankers away from the leads noted that Erste had seemingly prioritised size, having announced a benchmark size rather than a no-grow trade.

“The oversubscription is again relatively modest, but they were able to get more than the standard EUR500m relatively easily,” said one.

Swedish Covered Bond Corporation (SCBC) published a mandate this afternoon for a dual-tranche, five and 15 year covered bond issue. A syndicate banker at one of leads ABN Amro, Citi, Credit Suisse, Danske, Goldman Sachs and Natixis said the deal will be launched tomorrow, subject to market conditions.

The deal will be the first 15 year euro benchmark covered bond issued out of Sweden.

Oversea-Chinese Banking Corporation (OCBC) announced this afternoon that it has mandated Barclays, BNP Paribas, LBBW and OCBC to lead manage a euro benchmark seven year covered bond, which is also expected tomorrow.

SpareBank 1 Boligkreditt meanwhile printed a £250m five year covered bond at 63bp over Gilts today, on the back of around £280m of orders. Credit Suisse, NatWest and RBC were the leads. The deal followed investor meetings in London yesterday for a fixed or floating rate transaction.