DNB Boligkreditt attracted some EUR2.4bn of demand to a five year benchmark today (Wednesday), to be able to raise EUR1.75bn at a new issue premium of only 3bp, with the Norwegian issuer’s deal representing pre-funding as thoughts turn to a busy and potentially more difficult January.

The issuer and its leads announced its deal this morning after markets opened positively in the wake of US mid-term election results overnight, with DNB having reportedly been eyeing the market since the beginning of the week.

Leads Crédit Agricole, Deutsche, DNB, Nomura and NordLB opened books for the euro benchmark five year trade with initial guidance of the mid-swaps plus 8bp area. A syndicate banker at one of the leads said that fair value was seen in the context of the plus 2bp area.

He compared the approach to that taken on a Bank of Nova Scotia EUR1.75bn five year deal on 16 October, when the issuer went out with a starting new issue premium of some 6bp and ended with a 3bp NIP, at 6bp, on the back of around EUR2.2bn of demand.

DNB attracted over EUR1bn of orders, excluding joint lead manager interest, in the first hour of bookbuilding, and after just over an hour and three-quarters the spread was fixed at 5bp over, on the back of over EUR2bn of demand, representing a new issue premium of 3bp – the lower end of the range achieved recently on euro benchmarks.

The lead syndicate banker said shorter maturities have generally been preferred to longer maturities recently, and the response to DNB’s five year today was no different.

“The intention was to raise prefunding ahead of the January rush,” he added, “which is a pretty straightforward move towards the end of the year for an issuer who can access the market at any time.”

Commerzbank analysts highlighted potential January pitfalls in an early forecast for 2019 issuance yesterday.

“We expect issuance activity to once again be frontloaded in the New Year, since many banks will likely want to become active sooner rather than later again given the political uncertainties and the trend towards wider spreads,” they said. “Sufficiently strong and stable investor interest for such lively supply is likely to require sustained generous spread premiums.

“This should keep covered bond spreads under pressure in early 2019. At the same time, lower ECB demand is likely to result in smaller issue sizes but fairly frequent market appearances.”

The Commerzbank analysts forecast gross euro benchmark issuance of EUR130bn-EUR140bn for 2019 – implying net growth of some EUR35n – little different to this year’s likely total given that year-to-date supply has just surpassed EUR130bn. They said they might have forecast more, were it not for growing expectations that the ECB will offer a replacement for TLTROs.