The covered bond market again allowed for pricing inside fair value today (Wednesday) as Sparebanken Sør Boligkreditt priced a EUR500m no-grow seven year benchmark on the back of some EUR1.8bn of demand, although issuance was otherwise confined to a tap.

The mandate for the Norwegian issuer was announced yesterday (Tuesday) afternoon and this morning leads DZ, LBBW, Nordea, Swedbank and UniCredit opened books on the EUR500m (NOK4.9bn) seven year with initial guidance of the mid-swaps plus 23bp area.

Orders reached EUR1bn after around 50 minutes and after an hour and a half guidance was revised to 20bp+/-1bp, WPIR, on the back of books of EUR1.5bn. The spread was ultimately fixed at 19bp on the back of books of EUR1.9bn, with EUR1.8bn, including EUR85m JLM interest, good at re-offer, comprising more than 100 accounts.

“With almost four times oversubscription they hit the bullseye in that respect,” said a syndicate banker at one of the leads. “And following yesterday’s Swedbank, they are now the second Scandinavian issuer pricing through the curve.”

Swedbank Hypotek priced a EUR1bn seven year at 13bp over mid-swaps yesterday, versus fair value seen at 14bp over.

He said fair value for a seven year Sparebanken Sør benchmark had been calculated at 20bp over mid-swaps. Among pre-announcement comparables circulated by the leads, Sparebanken Sør May 2022s were quoted at 14bp, mid, and its February 2023s at 16.5bp. Three Norwegian benchmarks had already been launched this month, and a seven year DNB was quoted at 16bp, and 10 year SpareBank 1 Boligkreditt and Eika Boligkreditt issues were seen at 20bp and 21bp over, respectively.

“It is more or less how each and every deal has been going,” added the lead syndicate banker. “We are back to the happy days from an issuer perspective when it comes to aggressive pricing.

“We are still going through this phase of madness and issuer may as well make use of it while it lasts.”

However, the only other new euro benchmark covered bond supply today was a EUR250m tap by La Banque Postale Home Loan SFH of an October 2028 deal. UBS and UniCredit increased the transaction at 18bp over mid-swaps, which compares with an initial re-offer in September 2018 of 3bp over. The French issuer sold a new EUR750m seven year deal at 15bp over on Wednesday of last week.

“If others issuers are looking and can move quickly, then they may be tempted and it wouldn’t surprise me if we saw more this week,” said a syndicate banker.

Blackouts have constrained issuance, but should progressively become less of a factor.

“We expect Nordic and Spanish banks this week, and French and Benelux banks next week,” said SG analysts. “Once the reporting season is over, banks will be able to surface again.

“That said, given the strong wave of supply in January compared to the relatively low supply in secured unsecured and senior non-preferred space, we expect issuers to go for the latter, if market conditions remain supportive.”

They noted that Belgian, Portuguese and Irish banks have yet to approach the covered bond market this year – as well as UK names in euros.

“It would not surprise us if Greek covered bonds were to surface,” they added, “given the strong reception of the Monte deal last week; the successful auctions of the 15 year BTP, 10 year Bono and Hellenic Republic new five year euro benchmark; and the fact that investors are searching for yield given that rates are still low.”