Volksbank Wien is set to follow up a roadshow with a debut euro benchmark next week, although any pick-up in covered bond supply may be tempered by banks opting for higher beta trades in the strong market. Yesterday (Thursday), TSB tapped a recent Sonia debut as the sector performed.

Only two new euro benchmark covered bonds hit the market this week – a EUR500m UBI Banca six year and a EUR500m NN Bank five year – although UniCredit offered a further EUR500m of supply through a tap. This is sharply down from some EUR6.25bn last week. However, all three of this week’s transaction were well supported, demonstrating that market conditions remain strong.

Syndicate bankers said today (Friday) that next week could see an uptick in supply in light of this, but noted that issuers emerging from blackouts could be tempted to opt for formats “more interesting than covered bonds”. This week financial institutions including BNP Paribas, BBVA and Rabobank achieved strong results in senior non-preferred/HoldCo format, and others are expected to follow their example.

However, at least one euro benchmark covered bond is near-assured, with Volksbank Wien’s leads announcing this morning that the Austrian issuer’s debut is planned for early next week, subject to market conditions, with a seven year maturity expected via DZ, Erste, HSBC, ING and LBBW.

The leads circulated comparables including Erste April 2026s at 7.5bp, mid, UniCredit Bank Austria January 2026s at 11.5bp, Raiffeisenlandesbank Vorarlberg September 2025s at 10bp, and Raiffeisenlandesbank Niederoesterreich-Wien August 2026s at 9bp.

TSB yesterday (Thursday) tapped for £250m a £500m (EUR570m) five year Sonia-linked issue launched two weeks ago, on 8 February, and did so 7bp tighter than the initial trade.

Leads Banco Sabadell and NatWest went out with guidance of the 85bp area for the tap, compared to a re-offer of 87bp on the original £500m deal, but with the paper having tightened to 77bp over. The tap was then priced at 80bp over on the back of some £600m of demand.

Noting that a £1bn five year Sonia-linked FRN from Nationwide Building Society had tightened from 75bp at launch on 3 January to 61bp over, a syndicate banker away from the TSB tap said Sonia-linked covered bonds have performed particularly well on the back of more investors getting involved in the new format in the primary and secondary markets, and he suggested this could have been a driver for the tap.

The original £500m deal, TSB’s Sonia-linked debut, was launched earlier this month after having been postponed from mid-November on the back of Brexit-related volatility, and the syndicate banker said the issuer had “come a long way” since then, now being able to achieve Friday intra-day execution for such a tap on the back of strong demand allowing it to tighten 5bp.