Well-received CFF and Aktia deals today (Tuesday) suggest the market is able to absorb resurgent supply, said bankers, ahead of expected issues from Berlin Hyp, Desjardins, ING Belgium and potentially another tomorrow, while the ECB’s evolving activity is being mulled.

Today’s EUR2.25bn of supply represents an sudden revival in covered bond issuance after only five benchmarks totalling EUR3bn were issued in the first three weeks of the month, including three throughout last week. Covered bond supply is now widely expected to pick-up ahead of the traditional summer slowdown, with conditions seen conducive on the back of redemptions of some EUR16bn in June – including EUR3.202bn of redemptions in the CBPP3 portfolio set to be reinvested, the highest for any month this year.

With three issuers – ING Belgium, Berlin Hyp and Fédération des caisses Desjardins du Québec – having announced expected deals and a fourth also said to be considering joining the market tomorrow (Wednesday), bankers said the signs from today’s supply were mostly positive.

“We can take confidence from the demand for today’s CFF and Aktia deals, as it seems spreads are holding in and the wider market has seen some retracement following a risk averse response to the Italian headlines yesterday,” said a syndicate banker. “If the market feels there is too much supply things could turn weaker again, but for tomorrow I think trades will continue to work.

“What is positive is that we have had just less than a handful of investors say they are staying away from the covered bond market because they expect a trend of wider spreads – that underpins the good state of the market despite an active day today and another active day expected tomorrow.”

Despite the upcoming redemptions, syndicate bankers who worked on today’s deals said there was no sign of a change in the Eurosystem’s approach to new issues, with the size of orders remaining in line with those seen in recent weeks – of around 30% of the expected issuance size.

“If the ECB do need to step up their buying again to make up for the portfolio redemptions next month, you would expect them to do that on the secondary market, rather than on the primary,” added one.

After the launch of a EUR500m 15 year Arkea deal this morning (see separate article), compatriot Compagnie de Financement Foncier announced that it had mandated BBVA, Barclays, HSBC, LBBW, Natixis and Swedbank to lead manage an eight year euro benchmark.

The deal was launched with guidance of the mid-swaps plus 6bp area. After around one hour and 15 minutes, the leads announced that books had surpassed EUR1bn, excluding JLM interest. The spread was subsequently fixed at 3bp, with books over EUR1.6bn, including EUR20m JLM interest, before the size was fixed at EUR1.25bn.

“Being able to tighten the spread by 3bp and still print EUR1.25bn tells you something about the quality of the book,” said a syndicate banker at one of the leads. “The book held well at the final spread revision.”

Syndicate bankers at and away from the leads said the deal offered a new issue premium of around 4bp, seeing CFF February 2026s at minus 2.5bp and September 2026s at minus 0.5bp. They also cited as comparables recent supply from other French issuers, seeing 2026 paper from Caffil, Crédit Mutel Arkea and Crédit Agricole all trading between minus 4bp and minus 2.5bp.

“That 4bp premium is fairly in line with what we’ve seen recently for EUR1bn-plus trades,” said a syndicate banker at one of the leads.

Syndicate bankers said CFF, similar to Arkea’s approach, had at the initial guidance stage offered a pick-up of around 30bp versus the interpolated OAT spread, ultimately pricing the deal with a pick-up of around 27bp.

Aktia Bank’s deal followed the completion of a European roadshow on Thursday and announcement of a mandate for the EUR500m no-grow five year issue on Friday.

Leads BNP Paribas, LBBW, Natixis and Nordea launched the deal this morning with guidance of the mid-swaps plus 1bp area. After around half an hour, the leads announced that books had surpassed EUR750m, and subsequently revised guidance to the minus 2bp area, plus or minus 1bp will price within range, with books over EUR1.25bn, including EUR20m JLM interest. The spread was later set at minus 3bp with books over EUR1.2bn good at re-offer, excluding JLM interest.

The deal is the Finnish issuer’s first euro benchmark covered bond since March 2015, and bankers said it was therefore difficult to calculate fair value for the new issue. Aktia April 2019s were seen at minus 12bp, mid, and March 2022s at minus 10bp, but bankers said the more appropriate comparables were recent issues from compatriot Nordea Mortgage Bank. They cited Nordea Mortgage Bank February 2023s – which were priced at minus 11bp in February – at minus 6bp-5bp.

“Pricing just 2bp-3bp back of the current secondary level of Nordea – a national champion – is a very good outcome for a smaller, rare name,” said a syndicate banker at one of Aktia’s leads. “Aktia had been trading with a pick-up of around 5bp versus Nordea in the past, but now it is a touch tighter due to the lack of supply from them.”

Nordea Mortgage Bank last Thursday priced a EUR1bn seven year issue at minus 3bp. The May 2025 issue was seen trading at around minus 5bp, mid, today.

ING Belgium announced a mandate this morning for a seven year euro benchmark Pandbrieven, expected to be launched tomorrow. BayernLB, Commerzbank, Danske Bank, ING, LBBW and SG have the mandate. The deal will be its first since euro benchmark since September 2015.

This afternoon Berlin Hyp announced that – on the occasion of 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.

Fédération des caisses Desjardins du Québec has mandated BNP Paribas, Commerzbank and Natixis for a five year euro benchmark. The Canadian issuer’s last euro benchmark covered bond came in November 2015.

Syndicate bankers suggested that a fourth issuer could also join the market with a euro benchmark issue tomorrow, with some suggesting that supply could yet emerge from Southern Europe.