Hypo Vorarlberg and BayernLB are set to come to the covered bond market tomorrow (Tuesday), with eight and nine year EUR500m issues, respectively, adding further supply to an unseasonably busy July, with the market expected to remain active until at least the end of this week.

Hypo Vorarlberg announced this morning that it has mandated Commerzbank, Deutsche, DZ, LBBW and SG to lead manage its EUR500m no-grow eight year mortgage-backed issue. A syndicate banker at one of the leads said the deal will be launched tomorrow, subject to market conditions.

The deal will the second euro benchmark covered bond from Austria this month, following a EUR500m 10 year for RLB Oberösterreich on Thursday, which was priced at 5bp over mid-swaps and seen trading 2bp-3bp tighter today.

Hypo Vorarlberg’s last euro benchmark covered bond was a EUR500m seven year in May 2017.

BayernLB this afternoon announced a mandate for a EUR500m no-grow nine year public sector Pfandbrief, which is also expected tomorrow. BayernLB, Erste, Helaba, Natixis and UniCredit have the mandate.

No euro benchmark covered bond supply emerged today, but the market is expected to remain active in the coming days as the anticipated summer slowdown approaches and coming after unseasonably heavy issuance last week.

Including taps, EUR7.25bn of euro benchmark covered bonds were issued last week, making it the third busiest week of the year, behind the first two weeks of January. This month is therefore already the busiest July in the market since July 2015 – an outlier in which issuance totalled EUR17.75bn in the second busiest July in the history of the market.

Syndicate bankers expect issuance to continue for at least to the end of this week before the summer lull kicks in, but say the pace of supply should be slower than last week as some issuers enter their blackout periods.

Deutsche Bank rounded off last week’s supply with a EUR250m tap of a EUR750m 2024 Pfandbrief today on Friday.

The EUR750m March 2024 Pfandbrief was reopened with guidance of the mid-swaps minus 5bp area for a EUR250m no-grow tap on Friday morning. The spread was ultimately fixed at minus 6bp, offering a new issue premium of around 1bp, bankers said. Books closed at around EUR300m.

The original EUR750m issue was priced at 2bp over mid-swaps in March 2016.

Photo: Hypo Vorarlberg