A dual-tranche, EUR1.25bn five and 15 year deal for SCBC hit the issuer’s targets today (Wednesday), despite questions over demand for the longer tranche, while a EUR500m seven year for OCBC struggled to garner interest, ultimately pricing in line with guidance.

A weakening of conditions and investor selectiveness have increased the unpredictability of success in the market. Recent deals have achieved modest successes by paying up, but bankers said the market had today turned more sluggish.

“Leads have taken longer than usual to come out with updates and some of the results are rather underwhelming,” said one.

The last update on the EUR500m deal of Oversea-Chinese Banking Corporation (OCBC), for example, was only EUR430m.

Some syndicate bankers doubted whether further supply will emerge this week, and said issuers would be better served to wait for a stabilisation in spreads – after a widening of 1bp-3bp across jurisdictions in recent sessions.

“I would not be advising anyone to rush, and if anyone really had to do a deal this week, I would caution them to prepare very carefully,” said one.

Another syndicate banker agreed.

“Hopefully a break in issuance, which will come with blackout periods, will bring some performance.”

Swedish Covered Bond Corporation (SCBC) announced yesterday (Tuesday) afternoon it had mandated ABN Amro, Citi, Credit Suisse, Danske, Goldman Sachs and Natixis for its dual-tranche, five and 15 year covered bond issue.

This morning the five year tranche was launched with guidance of the mid-swaps minus 2bp area and the 15 year with guidance of the 10bp area. After around one hour and 50 minutes, the leads announced that combined books had surpassed EUR1bn.

The spread of the five year was subsequently set at minus 5bp, with the size yet to be decided, and the spread of the 15 year set at 10bp and the size at EUR500m, with combined books over EUR1.4bn. The size of the five year was later fixed at EUR750m.

“It’s mission accomplished – in the end SCBC got both the size and duration they were looking for,” said a syndicate banker at one of the leads. “SCBC typically print EUR500m-EUR750m, so this is a big deal for them.”

The balance of orders between the two tranches was not announced, but bankers at the leads said demand was skewed towards the shorter-dated tranche. Some syndicate bankers away from the leads speculated that the 15 year tranche may have been only marginally subscribed.

“It seems that at least investors were not so keen on the 15 year tranche as to provide a more clearly oversubscribed book,” said one.

The longer-dated tranche is the first 15 year euro benchmark covered bond issued out of Sweden. Swedish issuers have historically preferred five to seven year issuance, but in recent years some – SCBC among them – have issued 10 years.

“That may not have worked in their favour, as some of the typical 15 year accounts may have been taken by surprise by this trade and may not have had lines in place for SCBC,” said a syndicate banker away from the leads.

However, some bankers said the combined book represented a decent result given market conditions.

“The overall oversubscription is not huge, but it is within the parameters we have seen in recent deals, and that’s without the support of the ECB,” said a syndicate banker.

The five year tranche was deemed to have offered a new issue premium of around 5bp versus the issuer’s curve, with bankers seeing the SBAB-subsidiary’s June 2022s at minus 11bp and February 2024s at minus 9bp.

Bankers said fair value for the 15 year tranche was more difficult to calculate given the lack of Swedish comparables. A syndicate banker at the leads said it offered a new issue premium of around 7bp, looking at comparables including SCBC March 2027s, seen at minus 5bp, and recent 15 year supply from comparable Eurozone issuers. The pricing of the 15 year tranche matches the final spread of a EUR500m 15 year issue for Axa Bank Europe yesterday, which was sold as part of a dual-tranche deal alongside a EUR750m seven year.

SCBC had already issued one euro benchmark covered bond this year, a EUR750m seven year on 22 January.

Following a mandate announcement yesterday afternoon, OCBC leads Barclays, BNP Paribas, LBBW and OCBC launched its EUR500m no-grow seven year issue this morning with guidance of the mid-swaps plus 9bp area. The leads later announced that books were at EUR430m with the spread unchanged, before pricing the deal at 9bp.

Syndicate bankers away from the deal said the lack of further book updates suggested the deal may not have been fully subscribed.

“It is the first time for some time that a deal outside Germany has struggled in quite this way,” said one. “It happens from time to time.”

Some syndicate bankers said the issuer’s starting point may have been too tight, suggesting that initial guidance in the double-digits would have gained stronger momentum, but others said the starting premium was in line with those offered by more successful recent trades.

The 9bp spread was deemed to have incorporated a new issue premium of around 7bp, with bankers citing the last seven year euro benchmark covered bond from Singapore, a EUR500m January 2025 issue for United Overseas Bank, quoted at around 2bp, mid, this morning.

The deal is OCBC’s second euro benchmark covered bond of the year, following a EUR500m five year priced at minus 2bp on 22 February. The March 2023 issue was seen at minus 1bp-flat, mid, today.

OCBC did not have the support of the Eurosystem, noted some bankers, unlike the three euro benchmark trades issued yesterday, which each met demand sufficient for leads to tighten the pricing.