RBC and Deutsche Hypo met contrasting fates today (Thursday) as the Canadian bank priced a EUR1.5bn five year issue 4bp inside guidance, with demand peaking at over EUR2.6bn, and the German issuer priced a EUR500m eight year 1bp inside guidance upon EUR575m of orders.

The euro covered bond market was quiet yesterday with no benchmarks emerging, but a positive session increased issuers’ interest in joining the market today, said syndicate bankers, and even after a softer open on the back of renewed trade war fears RBC and Deutsche Hypo – which announced a mandate for its Pfandbrief yesterday – decided to move ahead.

Royal Bank of Canada (RBC) leads Crédit Agricole, Deutsche, Lloyds, Natixis and RBC opened books for a five year euro benchmark issue this morning with guidance of the mid-swaps plus 6bp area. After around 40 minutes, the leads announced that books were above EUR1bn.

In a second update around one hour later, the leads announced that books were above EUR2.3bn, and subsequently fixed the spread at 2bp with books above EUR2.6bn, indicating that the deal was expected to have a minimum size of EUR1bn. The size was later set at EUR1.5bn, with the final book in excess of EUR2.2bn

“Everything fell into place today for a name like RBC,” said a syndicate banker at one of the leads. “These transactions always enjoy a lot of the spotlight, especially for RBC due to the scarcity element coupled with the fact they’re a national champion.

“That triggered a very positive response. The book built very well – obviously with some limits, but nothing that prevented us from pushing the price – and that allowed us to set the spread at plus 2bp.”

The deal is RBC’s first euro benchmark covered bond since February 2016. The issuer has since issued benchmarks in the sterling, US dollar and Canadian dollar markets.

The final spread incorporated a new issue premium of around 2bp, said bankers, based on Canadian banks’ secondary curves.

“It’s not like RBC were at all overly generous,” said the lead syndicate banker. “The initial guidance offered 6bp-7bp concession, which is more or less in line with what most issuers have offered recently.”

Following its mandate announcement yesterday afternoon, Deutsche Hypothekenbank leads Commerzbank, Crédit Agricole, Helaba, NordLB and UniCredit launched the EUR500m no-grow eight year mortgage Pfandbrief with guidance of the mid-swaps minus 4bp area this morning.

Over two hours later, the leads fixed the spread at minus 5bp with books at EUR575m, including EUR50m joint lead manager interest.

The deal’s substantially lower demand was attributed to the relative expensiveness of the German Pfandbriefe market.

Bankers said the deal offered a new issue premium of around 5bp, seeing Deutsche Hypo June 2025s – the issuer’s longest dated outstanding – at around minus 11bp, mid.

Some syndicate bankers also noted that on 8 June, DG Hypothekenbank priced a EUR500m nine year Pfandbrief at mid-swaps minus 7bp, and the June 2027 issue was seen quoted at around minus 9bp, mid, today. They said that Deutsche Hypo’s pricing of its shorter-dated deal at a wider spread reflected weaker market conditions.