Swedbank priced a EUR1bn seven year covered bond 1bp inside fair value today (Tuesday) on the back of some EUR2.4bn of demand, while Aareal Bank priced its largest benchmark in at least eight years, a EUR750m five year. Sparebanken Sør has mandated a EUR500m seven year, expected tomorrow.

According to syndicate bankers at and away from the Swedish deal, Swedbank’s re-offer of 13bp over was 1bp inside fair value of 14bp over. Swedbank May 2024s, the issuer’s longest dated outstandings, were quoted at 12bp, mid, pre-announcement, while Stadshypotek October 2026s were at 14.5bp, and Nordea and Stadshypotek 2025 paper was at 13.5bp.

Leads Barclays, HSBC, LBBW, Natixis and Swedbank had initially gone out with guidance of the mid-swaps plus 17bp area. Demand surpassed EUR2.3bn after two hours – following an interim update of EUR1.75bn after an hour and a quarter – and guidance was revised to 14bp+/-1bp, WPIR, before pricing was set at 13bp and the size at EUR1bn (SEK10.3bn) on the back of EUR2.4bn of orders, pre-reconciliation, from more than 100 accounts.

The deal is the second Swedish euro benchmark of the year, after a EUR500m seven year for LF Hypotek that was priced at 22bp over on Tuesday of last week, although market participants noted Swedbank typically prices tighter than LF. A lead syndicate banker said Swedbank benefited from being the first EUR1bn Swedish issue of the year, a general lack of Swedish euro issuance, and from the issuer being relatively infrequent – its last euro benchmark was in February 2018, when it sold a EUR1bn five year at 10bp through mid-swaps.

“It’s gone very well – similar to all trades of late,” he added. “As we’ve seen on others, the books built very quickly, and each time we’ve gone out with an update, the book has gotten bigger, which is always encouraging to see.”

Another lead syndicate banker said pricing in fair value had not been targeted and described the outcome as “awesome”.

“It just tells you that something is cooking in the market,” he added.

Aareal had announced its mandate yesterday (Monday) afternoon and leads Commerzbank, DekaBank, DZ, Natixis and UniCredit opened books for the five year euro benchmark mortgage Pfandbrief this morning with guidance of the mid-swaps plus 7bp area. Books were above EUR1bn after around half an hour, and after an hour and a quarter guidance was revised to 5bp+/-1bp, WPIR on the back of demand of over EUR1.5bn. The spread was ultimately fixed at 4bp and the size at EUR750m with books above EUR1.6bn, and EUR1.4bn was good at re-offer, including around 80 accounts.

A lead syndicate banker said the deal paid no new issue premium. Aareal July 2024s and June 2023s were quoted at 3bp over, mid, pre-announcement, while five year euro benchmarks for Commerzbank and Deutsche Pfandbriefbank were quoted at 4bp and 5bp, respectively. At the end of November Aareal sold a EUR500m February 2023 Pfandbrief at mid-swaps flat on the back of over EUR625m of demand, and that was quoted at 1bp over.

Today’s benchmark is Aareal’s largest in any currency in at least eight years, with the issuer typically issuing EUR500m.

It takes year-to-date German issuance to EUR9.5bn, making it the busiest January for the jurisdiction since 2003, when German banks sold EUR11.2bn of benchmarks, according to Maureen Schuller, head of financials research at ING.

The benchmark is Aareal’s first since it completed the acquisition of Düsseldorfer Hypothekenbank at the end of 2018.

Sparebanken Sør Boligkreditt is expected tomorrow (Wednesday) with a EUR500m no-grow seven year issue via DZ, LBBW, Nordea, Swedbank and UniCredit. The Norwegian’s last euro benchmark was a EUR500m five year issue at 5bp through mid-swaps in February last year.

That trade, which is its longest outstanding benchmark, was quoted at mid-swaps plus 16.5bp, mid, pre-announcement. The most recent Norwegian seven year, for DNB Boligkreditt earlier this month, was at 16bp.

A syndicate banker on one of today’s trades described the market as “bulletproof”, but another was less sure.

“All the market is crazy,” he said. “I was looking at the books in the SSA space – Belgium, Austria, Greece, KfW – it’s just nuts.”

KfW attracted some EUR17.6bn of orders to a EUR5bn long five year benchmark today.

“Something will go wrong soon,” added the syndicate banker, “because it’s not sustainable.”