Covered bonds in the belly of the curve were the beneficiaries of a flight to quality in a “scary” market today (Wednesday), with ING Belgium sevens and Desjardins fives the biggest winners, but investor reticence to venture out along the curve contributed to a more muted response for Nationwide 10s.

All four of today’s deals were at least comfortably oversubscribed, which bankers said was not a given amidst unpredictability in the wider market – noting that in the corporate sector, for example, deals were struggling despite offering 20bp-30bp premiums or even – in the case of Whirlpool today – being pulled.

“Things in the markets are definitely interesting right now, and a little bit scary,” said a syndicate banker. “There is a definite flight to safety at the moment, because covereds are doing way better than unsecured bonds at the moment.”

Syndicate bankers said investors are making clear their preference for deals in the belly of the curve, noting this was reflected in demand for today’s supply. They also said that to ensure success, issuers and their leads ought to follow the newly-established template of offering a new issue premium of 6bp-8bp at the initial guidance stage, and noted that investors were favouring deals priced with positive – or at least not negative – spreads.

“That is shown if you look at the deals with the biggest books today, ING Belgium’s fantastic seven year and Desjardins’ five year,” said a syndicate banker away from today’s trades. “You can see those kind of trades are doing really well.”

Another syndicate banker who worked on more than one of today’s trades agreed.

“Covered bonds have taken advantage of the shaky market window, with the three deals in the belly of the curve the best ones and the Nationwide – although it was trickier – also worked in the end,” he said. “The market deteriorated through the day and we had some sensitivity of course, but there was still good momentum and it is fair to say books ended up where you could have expected them to end up.”

ING Belgium announced a mandate yesterday morning for its seven year euro benchmark Pandbrieven. Leads BayernLB, Commerzbank, Danske Bank, ING, LBBW and SG launched the deal this morning with guidance of the 3bp over mid-swaps area.

After around one hour, the leads announced that books had surpassed EUR1bn. Guidance was subsequently revised to the 1bp area, plus or minus 1bp will price within range, with books above EUR1.4bn, excluding joint lead manager interest. The spread was then fixed flat to mid-swaps, and the size was later fixed at EUR1.25bn, with books above EUR1.6bn, excluding JLM interest, at the final spread.

The deal is ING Belgium’s first since euro benchmark since September 2015.

Syndicate bankers said the deal offered a new issue premium of around 4bp-5bp, seeing BNP Paribas Fortis September 2024s at minus 5bp, mid, Belfius February 2025s at minus 4bp and KBC March 2026s at minus 6bp. They also cited as comparables recent seven and eight year covered bonds from other core countries, seeing HSBC April 2025s at minus 6bp, Nordea May 2025s at minus 4bp and Rabobank April 2026s at minus 4bp.

Fédération des caisses Desjardins du Québec announced yesterday afternoon that it had mandated BNP Paribas, Commerzbank and Natixis to lead manage its five year euro benchmark issue.

The deal was ultimately priced at 3bp over mid-swaps today, down from initial guidance of the 7bp area and revised guidance of the 4bp area, plus or minus 1bp will price within range. The size was fixed at EUR750m with books closing over EUR1.3bn.

“If you account for the CBPP3 order in ING Belgium’s book, the demand here isn’t far off that Eurozone trade,” said a syndicate banker away from the leads.

The Canadian issuer’s last euro benchmark covered bond came in November 2015. Bankers said it was therefore difficult to calculate fair value for the new issue, but said it paid a final new issue premium of around 3bp, seeing BNS September 2023s – the most recent five year benchmark from Canada – quoted at around flat, mid.

Berlin Hyp announced yesterday afternoon that – to mark the bank’s 150th birthday – it has mandated Crédit Agricole, Commerzbank, DZ Bank, LBBW and UniCredit to lead manage a five year euro benchmark “jubilee” Pfandbrief.

Syndicate bankers away from the deal said the German issuer chose the correct maturity and took the right approach to pricing, but said that lower demand it went on to receive, relative to the Belgian and Canadian trades, reflected the negative spreads on offer in the German Pfandbriefe market.

The deal was launched this morning with guidance of the mid-swaps minus 8bp area, and after around one hour the leads announced that books were “well above” EUR600m. The size was subsequently set at EUR500m and guidance revised to the minus 9bp area, plus or minus 1bp will price within range, with books above EUR800m, excluding JLM interest.

The spread was then fixed at minus 10bp with books above EUR900m, including EUR80m JLM interest.

Syndicate bankers at and away from the leads said the deal offered a 6bp premium versus the issuer’s curve, seeing its February 2023s at minus 16bp, mid.

Nationwide Building Society was the only issuer of the four active today that did not pre-announce its deal yesterday. Leads Deutsche Bank, HSBC, SG and UBS launched the 10 year deal this morning with guidance of the 14bp over mid-swaps area. Guidance was later revised to the 13bp area, before the spread was fixed at 13bp. The final book stood at EUR675m.

While noting that the deal was comfortably oversubscribed, bankers attributed the deal’s more modest demand to its maturity.

“There is a flight to safety so triple-A paper is definitely in favour, but you must also consider that investors are still worried about rates volatility at the other end of the spectrum,” said a syndicate banker away from the leads. “If you go too long on the curve, investors tell you it doesn’t really fit their investment horizons.

“It just feels weak in the long end now. It is not the moment to do long-dated covereds.”

Yesterday, a EUR500m 15 year covered bond for CM Arkéa received the lowest demand of the three deals in the market, with a final book of EUR540m. This was yesterday attributed to headlines surrounding the French issuer, although today the deal’s longer maturity was seen as a potential contributing factor.

Syndicate bankers away from the leads said Nationwide’s deal paid a new issue premium of around 7bp, based on the issuer’s secondary curve.

“I don’t think there was anything wrong with the pricing, as they offered 8bp at the start, in line with the others,” said a syndicate banker away from the leads. “It’s a good NIP, but it’s just not the maturity that investors like at the moment.”

No further deals have been announced for execution this week, and bankers said that while more supply could emerge tomorrow, issuers are likely to opt for intraday executions given the risk of an overnight deterioration of market conditions.

Møre Boligkreditt announced this morning that it has mandated LBBW and Nordea to arrange a European roadshow, after which it will launch a sub-benchmark euro covered bond with an intermediate maturity, subject to market conditions.

The roadshow is expected to run from 5-7 June, visiting Helsinki, Copenhagen, Germany and the Benelux.