Nordea attracted more than EUR2bn of orders to a “clinical” EUR1bn seven year covered bond today (Thursday), a result seen boosting market confidence, with a new issue premium at the lower end of recent supply. Commerzbank is set for a EUR500m seven year deal tomorrow.

Nordea Mortgage Bank leads HSBC, LBBW, Nordea, SG and UBS launched the seven year issue with guidance of the mid-swaps flat area this morning. The leads later announced that books had surpassed EUR1.5bn, and subsequently set the spread at minus 3bp and the size at EUR1bn with books in excess of EUR1.8bn, including EUR100m joint lead manager interest. Final books good at re-offer were over EUR2bn, with more than 80 accounts.

“It’s gone very well,” said a syndicate banker at one of the leads. “A book of over EUR2bn for a EUR1bn is a very strong outcome, and it is a very high quality book.

“Nordea has always enjoyed a very strong investor following,” he added, “and they always execute clinically, no messing about.”

Another syndicate banker at the leads said the deal will go down as having helped restore market confidence, following several weeks in which issuers have had to navigate fluctuating demand and offer enticing new issue premiums.

Some syndicate bankers at and away from the leads said Nordea’s deal paid only a negligible new issue premium, citing Nordea Mortgage Bank February 2023s – one of the issuer’s most recent deals – at minus 6bp, mid.

“For sure, this is the lowest new issue premium post-Easter for a EUR1bn trade,” said a lead syndicate banker.

However, other syndicate bankers suggested the deal paid a new issue premium of more like 4bp, citing Nordea’s older November 2024s at minus 8bp, mid and March 2027s at minus 5bp.

“Both schools of thought have their merits,” said another lead syndicate banker. “We have been hearing from investors that they prefer to look at more recent transactions, hence I would be more in the camp of interpreting fair value based on the recent five year than the older, longer bonds.

“What is the real driver here is relative value, in particular with German investors seeing value versus SSA names.”

The deal is Nordea Mortgage Bank’s second appearance in the euro covered bond market this year, following a EUR2bn dual-tranche deal in February, comprising the EUR1.25bn February 2023s and a EUR750m February 2033 issue.

Maureen Schuller, head of financials research at ING, noted that the February 2023s were trading slightly wide of the rest of Nordea’s curve. Nordea Mortgage Bank November 2023s were seen at minus 7.5bp, mid, for example.

Schuller suggested that the February 2023s therefore have tightening potential, and said this would also hold for the new seven year issue if priced closely in line to the interpolated curve between the February 2023s and February 2033s.

One of the lead syndicate bankers said Nordea had decided to launch the deal today to get out ahead of public holidays at the start of next week, and to take advantage of strong market conditions and a lack of competing supply.

Commerzbank announced this afternoon that it has mandated ABN Amro, Commerzbank, DZ Bank, Santander and SG to lead manage its EUR500m no-grow seven year mortgage Pfandbrief. A syndicate banker at one of the leads said the deal will be launched tomorrow (Friday), subject to market conditions.

Syndicate bankers away from the leads suggested fair value for the new issue will be around minus 12bp.