Bank of Nova Scotia and BayernLB tried out more transparent pricing processes today (Friday) on successful EUR1.25bn five year and EUR500m six year deals, limiting any potential tightening from the outset, while a UniCredit EUR500m 10 year met with a muted reception.

New Year euro benchmark supply stands at EUR6.5bn from seven deals including today’s issuance, after Commerzbank opened the market on Wednesday and a trio of deals yesterday (Thursday). However, the two Germans and Canadian today enjoyed better market conditions than those hitting the market earlier in the week.

“We got a bit of a tailwind this morning with futures up sharply,” said a syndicate banker on one of today’s deals.

Bank of Nova Scotia (BNS) and BayernLB nevertheless adopted a different approach to those usually taken in the covered bond market, both going out with “will price in range” (WPIR) guidance from the start, whereas the wording is only typically used when guidance is refined or revised. Some investors have long lobbied for such strategies to be adopted.

BNS started with guidance of 20bp plus or minus 2bp for its euro benchmark five year, and BayernLB with 5bp plus or minus 1bp for its EUR500m six year – the latter also having its size fixed from the start.

Bank of Montreal (BMO) yesterday tightened a EUR1.25bn five year benchmark from guidance of the 22bp area to a re-offer level of 18bp in one step, on the back of as much as EUR1.9bn of demand, while Eurozone deals experienced 1bp or no tightening.

A syndicate banker on BNS’s deal said there had been some feedback from investors that the 4bp move from BMO was too aggressive, even if the transaction was ultimately deemed very successful.

“Kudos to BNS for being more transparent from the start,” he said.

BNS was able to tighten to 18bp over on the back of more than EUR1.5bn of orders and sized its deal at EUR1.25bn – matching BMO’s result. The lead syndicate banker said that this was not necessarily inevitable, given the crowded market and BNS’s more frequent issuance in euros.

BayernLB’s EUR500m no-grow six year Pfandbrief was meanwhile covered within 45 minutes of the books being opened at the 5bp plus or minus 1bp guidance, and a lead syndicate banker attributed this in part to the approach that was adopted.

“All syndicates have the feeling that investors are sometimes holding back their orders until they know what the spread is going to be,” he said, noting this was evident on Pfandbriefe for Commerzbank and LBBW this week. “We feel the approach was very much appreciated by investors.”

The spread was fixed at 4bp and books totalled more than EUR1bn when they were closed after an hour and a half. The book included 66 accounts and was very good quality, according to the lead banker, noting that the Eurosystem ticket was in for 5% of the deal.

“Maybe the one or the other issuer will think about doing this kind of strategy,” he said. “It also depends on the market, of course.

“We all especially know next week will be super-busy – which is also why new issue premiums are generally higher than last year.”

Based on fair value of flat to mid-swaps or minus 1bp, BayernLB was nevertheless able to limit its NIP to 4bp-5bp – at the lower end of the range for the week. Another lead banker said the pricing was relatively straightforward, after LBBW priced its EUR750m seven year issue at 5bp yesterday.

UniCredit’s 10 year euro benchmark – the first of the year – attracted EUR625m of orders, including EUR15m joint lead manager interest – and was sized at EUR500m in the middle of guidance. Leads BayernLB, Deutsche, Helaba, NatWest and UniCredit had gone out with guidance of the mid-swaps plus 15bp area, and after almost two hours fixed the spread at 15bp on the back of books above EUR500m, including EUR25m joint lead manager interest.

The deal was deemed to have paid a new issue premium of 8bp-9bp, at the upper end of the week’s range, although bankers said that working out fair value for Pfandbriefe such as UniCredit’s in the 10 year part of the curve was not straightforward.

“The only takeaway is that 10 years seems to be one of the most challenging points,” said a banker away from the deal.

He said that while the maturity is typically too long for bank treasuries, yields in 10 years are not deemed attractive by traditional buyers, such as insurance companies.

Crédit Agricole Home Loan SFH is nevertheless due with a 10 year euro benchmark it announced yesterday, via global coordinator Crédit Agricole, Natixis, NatWest, SG and UniCredit. As mentioned earlier, the primary market is expected to remain hectic, but no other euro benchmark mandates had been publicly announced by early this afternoon.