SR-Boligkreditt lifted spirits today (Tuesday) with a successful EUR750m seven year deal, the first benchmark in over a week, showing covered bonds to be able to ride out the nerves afflicting credit markets. Berlin Hyp’s latest green Pfandbrief, a seven year, is expected tomorrow.

The Norwegian deal is the first benchmark covered bond since ING-DiBa sold a EUR1.5bn dual tranche issue on Tuesday of last week (2 October), with volatility, notably resulting from Italian budget developments, having dampened issuance prospects in the interim.

However, a better opening today encouraged belief that SR-Boligkreditt’s new issue could be successfully executed, with secondary covered bond spreads also having remained relatively stable, according to a syndicate banker at one of the issuer’s leads.

“It is a covered bond, after all,” he said. “Let’s not lose our heads on the back of the Italian story for a Norwegian issuer.

“BTPs were trading wider again this morning on the back of some Salvini comments, but we were confident that investors are taking the Italian story as an isolated case. So with a tenor that is OK from a risk perspective and starting with a new issue premium at the wider end of what we have seen recently, we were confident that a EUR500m-EUR750m deal would work.”

Citi, Goldman Sachs, LBBW, Nomura and NordLB went out with guidance of the mid-swaps plus 9bp area for a benchmark-sized issue, implying a starting new issue premium of 8bp, with fair value seen at 1bp based on comparables including SR-Boligkreditt October 2024s at minus 1bp, mid, pre-announcement, DNB November 2024s at minus 1bp and DNB June 2025s at flat.

“This could be seen as a generous starting point,” said a banker away from the leads, “but it was simply the appropriate approach.”

Following a first book update of EUR600m, the spread was fixed at plus 6bp with books above EUR1bn, pre-reconciliation. The final book at launch spread was over EUR900m.

“It went very well,” said the lead syndicate banker. “I just hope other issuers will follow with more business.

“October so far hasn’t been that active, with only the ING-DiBa dual tranche previously, and with the volatility affecting credit markets.”

Syndicate bankers said the outlook for covered bonds, at least, is indeed now more promising.

“We’ve had this SR-Boligkreditt paying a 5bp NIP and having a nice book for what is a non-Eurozone issuer,” said one, “and we’ve had also ESM and a couple of other SSA trades going well in the past 48 hours, so that gives a little bit more comfort that investors are willing to engage on trades.”

Subject to market conditions, Berlin Hyp is expected to launch its latest green Pfandbrief tomorrow (Thursday), a EUR500m no-grow seven year mandated to ABN Amro, BayernLB, Commerzbank, Crédit Agricole and JP Morgan.

Even before SR-Boligkreditt’s success today, the German deal had been a candidate for launch tomorrow, with its roadshow having concluded today.

Comparables cited by the leads include Berlin Hyp’s two longest dated Pfandbriefe, February 2025s at minus 14bp, mid, and February 2026s at minus 12bp, with fair value put in the context of minus 13bp. Some Pfandbriefe for BayernLB, DZ and LBBW trade a little tighter, noted one lead syndicate banker, although the most recent comparable, a Helaba seven year issued on 18 September at minus 9bp was at minus 10bp today – albeit for a larger, EUR1bn size.