CASA, MüHyp in 10s revival, Vest joins pre-summer push
A EUR1.5bn Crédit Agricole long 10 year deal and a EUR500m MüHyp long nine year today (Tuesday) evinced demand for tenors that would not have been “touched with a bargepole” only recently, while Sparebanken Vest sold a EUR500m short five year to add to lively pre-summer supply.
Only three euro benchmark covered bonds were issued in the whole of July 2017, with the last of these coming on 11 July. As today’s three trades follow a EUR750m long four year Pfandbrief for Berlin Hyp yesterday (Monday) this month’s issuance has already surpassed that of last July, and bankers expect further supply before the summer break kicks in as issuers take advantage of still supportive conditions, with at least a few issuers said to be monitoring the market.
“I am aware of a few more projects, so I think we should be busy into next week,” said a syndicate banker. “The market is clearly open, so if you have a deal to do, why not do it now?”
Another syndicate banker suggested that Bastille Day, on 14 July, represented “a hard deadline” for the onset of the summer break, but said markets are likely to remain active until then.
Of today’s deals, syndicate bankers said Crédit Agricole Home Loan SFH’s stood out as the highlight due to its size and the demand it received.
Leads Bankia, BBVA, Commerzbank, Crédit Agricole, Deutsche and UniCredit opened books for the August 2028 obligations de financement de l’habitat with guidance of the mid-swaps plus 7bp area this morning. Around 50 minutes later, the leads announced that books were over EUR1bn, excluding joint lead manager interest. The spread was later set at 3bp and the size at EUR1.5bn, with books over EUR2.1bn, excluding JLM interest.
“It went very well,” said a syndicate banker at one of the leads. “The size is a surprise to the upside, but we were happy to print EUR1.5bn and the issuer was as well.”
The size of the book – which allowed Crédit Agricole to print the largest French covered bond since April – was held up as proof of renewed demand at the long end.
“There has been a scarcity of supply in this maturity bracket, with a lot of five and seven years recently,” said the lead syndicate banker. “We still expect more supply to come in the shorter end and less in this 10 year region, but I think Crédit Agricole’s deal could open space for some copy and paste trades from Tier 1 issuers from not just France but other core regions.”
A syndicate banker away from the leads said that only a few weeks ago syndicates “wouldn’t have touched a 10 year trade with a bargepole”.
Syndicate bankers said the deal paid a new issue premium of around 5bp, based on the issuer’s curve.
“That shows new issue premiums are stable, but still relatively high, especially if you want to print in size,” said the lead syndicate banker.
However, some syndicate bankers said the premium was substantially lower if measured against the last 10 year euro benchmark from France, a CM-CIC April 2028 issue seen at around 2bp, mid.
Münchener Hypothekenbank leads Credit Suisse, Deutsche Bank, DZ, HSBC and NordLB launched the EUR500m no-grow November 2027 mortgage Pfandbrief with guidance of the mid-swaps minus 5bp area this morning.
After just over one hour, the leads announced that books had exceeded EUR550m, excluding JLM interest. Guidance was later revised to the minus 7bp area, plus or minus 1bp will price within range, with books above EUR900m, including EUR20m joint lead manager interest. The spread was then fixed at minus 8bp with books over EUR1bn, pre-reconciliation.
“Printing at less 8bp, which is quite a price given fair value is in the context of less 11bp, is quite an achievement,” said a syndicate banker away from the leads.
The lead syndicate banker agreed that the long end is now working substantially better than it was just weeks ago.
“A couple of weeks ago we would have basically done everything except a 10 year,” he said. “Now, this 10 year area seems to be very much the flavour of the season – even if it is not clear exactly what has changed.”
The final spread was deemed to offer a new issue premium of around 3bp, with bankers citing MünchenerHyp March 2025s at minus 14.5bp, mid, August 2026s at minus 12.5bp and May 2027s at minus 12bp. Syndicate bankers also cited the most recently launched long dated benchmark Pfandbriefe as comparables, seeing DG Hyp June 2027s at minus 9bp and apoBank July 2028s at minus 6.5bp.
Sparebanken Vest Boligkreditt announced yesterday (Monday) afternoon that it had mandated Commerzbank, Credit Suisse, Danske Bank, LBBW and Natixis to lead manage its EUR500m no-grow March 2023 issue.
The deal was launched this morning with guidance of the mid-swaps plus 4bp area. After around 40 minutes, the leads announced that books were above EUR500m, excluding JLM interest. Guidance was then revised to the 2bp area, plus or minus 1bp will price within range, with books “well over” EUR800m, excluding JLMs. The spread was then fixed at 1bp with books over EUR1bn, excluding JLMs.
A syndicate banker at one of the leads highlighted that the deal received strong interest from bank treasuries and central banks, and from German accounts.
“We will see more in this maturity bracket in the coming days,” added the lead syndicate banker. “I’m sure Vest picked the right window for the execution, as they were able to pay just 3bp new issue premium.
“We do not know how much new issue premium issuers will have to pay in the coming days or next week.”
A syndicate banker away from the leads described the twice-subscribed deal as “very solid”.
Bankers said the deal paid a new issue premium of around 3bp versus the issuer’s curve. Sparebanken Vest Boligkreditt March 2021s were seen before the mandate announcement at minus 5.5bp, mid, April 2022s at minus 3.5bp, February 2024s at minus 2.5bp and February 2025s at minus 1bp.