A EUR500m seven year sustainable covered bond for Caja Rural de Navarra (CRN) today (Wednesday) benefitted from its SRI factor and an attractive pick-up to core supply to come flat to the issuer’s curve. Skipton issued an inaugural £400m FRN and Natixis a EUR250m Pfandbrief.

Despite being issued into a market where the balance of power is deemed to have shifted from issuers to investors, CRN was able to print its trade at extrapolated fair value thanks to various supporting factors, syndicate bankers said, also including improved sentiment around Spain.

“There were a lot of factors pushing in the right direction for CRN, meaning that even in a tricky market they found many happy buyers,” said one.

Following a mandate announcement yesterday (Tuesday), leads Banco Cooperativo Español, Commerzbank, DZ, HSBC and ING launched the EUR500m no-grow cédulas hipotecarias transaction with guidance of the 30bp over mid-swaps area this morning. After just over one hour, the leads announced that books had surpassed EUR1bn.

Guidance was then revised to the 26bp area with books above EUR1.6bn, before the spread was fixed at 24bp, with books closing at EUR1.8bn, pre-reconciliation.

Syndicate bankers away from the leads highlighted that the demand was at the larger end of that seen in recent trades. CRN’s book is the biggest for a single-tranche cédulas transaction since a Banco Sabadell deal in April 2017, which was the last Spanish benchmark of last year.

Its success was partly attributed to the deal’s sustainable flavour, with bankers noting that recent green issuances in the senior unsecured market attracted greater demand than conventional comparables, supported by the extra demand from specialist accounts.

“The ESG factor helps to engage further investors and we have seen that these trades can work much better than others in challenging market conditions,” said a syndicate banker away from the leads.

The cooperative bank’s new issue is its second sustainable covered bond, following a EUR500m seven year in November 2016.

The relatively rarity of the name and of Spanish paper overall was also cited as a factor for the strong demand. The cooperative bank’s deal is only the third Spanish covered bond this year, following EUR1bn and EUR500m deals for CaixaBank and Bankinter, respectively, in January.

Sentiment around Spanish debt has also been boosted in recent weeks by a wave of upgrades following S&P’s lifting of the sovereign to A- in March, while Moody’s upgraded Spanish covered bonds last week on the back of raising Spain to Baa1, including CRN’s from Aa2 to Aa1.

Syndicate bankers said such factors enabled the issuer to print impressively tight to its secondary curve. Some bankers away from the leads said the deal was priced roughly flat to fair value based on CRN’s secondary curve, seeing its March 2022s at 10bp, mid, and November 2023s at 17bp, pre-announcement.

However, they said such levels were squeezed and that investors would instead be looking at the pick-up offered versus recent supply, noting that recent seven and eight year euro benchmark covered bonds from Axa, HSBC and Rabobank were all trading in negative territory, from minus 6bp to minus 2.5bp.

“Even with spreads having widened and new issue premiums having grown quite considerably, investors won’t get many chances to get a 30bp pick-up on deals they bought only last week,” said one.

Another syndicate banker agreed.

“If you think that two weeks ago in the ESG space, ABN Amro printed a green EUR750m seven year senior unsecured bond only slightly wider – at 28bp – that shows how much of an attractive pick-up peripheral covered bonds offer versus other jurisdictions,” he said.

The deal also offered a pick-up over the sovereign – which bankers noted was a rarity in the peripheral space – with the April 2025 Bonos seen at around 10bp, mid.

Skipton Building Society sold its first public covered bond today, with leads Barclays, BNP Paribas, Credit Suisse, HSBC and Santander launching the five year FRN with guidance of the three month Libor plus 35bp area this morning. They priced a £400m deal at 31bp upon £725m of orders.

The deal followed a two day roadshow held last week.

Natixis Pfandbriefbank’s EUR250m five year issue was priced at mid-swaps minus 4bp, down from initial guidance of the 2bp area, on the back of over EUR350m of orders, excluding joint lead manager interest. Helaba, Natixis and NordLB were the leads.

The deal is the German issuer’s third public covered bond.