Stadshypotek achieved one of its biggest order books on a EUR1.25bn seven year euro benchmark today (Tuesday), with the EUR2.4bn of orders allowing it to price the deal with no new issue premium. The Mortgage Society of Finland meanwhile successfully executed its latest sub-benchmark.

Svenska Handelsbanken subsidiary Stadshypotek’s euro benchmark is its first since July 2018, following three euro benchmarks in 2017 after it in September 2016 began issuing out of a Finnish cover pool alongside its Swedish pool.

Although its issuance included a record tight for Swedish euro benchmarks in November 2017, for example, a banker noted that its last couple of deals had not encountered overwhelming demand, with books of some EUR850m on the aforementioned EUR750m seven year deal and EUR1.25bn for its last, EUR1bn seven year.

“So it was particularly important that this was a successful trade,” he said. “And it was good to see investors embrace it.”

Announcing the deal this morning, leads Commerzbank, Crédit Agricole, Credit Suisse, Handelsbanken and HSBC went out with guidance of the 11bp over mid-swaps area. Books were above EUR1bn after around 40 minutes and after less than two hours the guidance was revised to 8bp+/-1bp on the back of over EUR2.3bn of demand. The deal was ultimately priced at 7bp and sized at EUR1.25bn on books above EUR2.4bn, pre-reconciliation and excluding joint lead manager interest.

A lead syndicate banker said the deal came flat to fair value based on Stadshypotek’s curve, and said that there was little price sensitivity in the book.

A banker away from the leads agreed the deal paid no new issue premium, but noted that the pricing was wide of compatriot SEB, which launched a EUR1.25bn seven year on 31 January that has tightened from a re-offer of 11bp to 5bp, attributing SEB’s level to the bank’s scarcer issuance. A EUR500m long six-year from Denmark’s Jyske Realkredit yesterday has meanwhile already tightened from 12bp to 9bp, he also highlighted.

Noting that the initial guidance was at 4bp over fair value, the lead banker said pricing of 8bp or in a best case scenario 7bp over had been anticipated, and that the leads had been keen to avoid a move of 5bp or more, as has been witnessed on a few deals this year.

“That was understandable in the changing market we saw as spreads were finding a new equilibrium,” he said, “but we need to move away from such big moves and normalise things now that the market is more stable.”

He said Stadshypotek had also done well to wait until the market was tighter before issuing, noting that the rally has now flattened out and spreads are unlikely to move significantly tighter.

“This was as close to a blow-out as you can get,” he added, “so it is good to see that investors still have cash to put to work for the right names even if the spread momentum has eased.”

The Mortgage Society of Finland (Suomen Hypoteekkiyhdistys) sold a EUR300m no-grow seven year issue at mid-swaps plus 15bp today, following a roadshow that finished on Monday.

Leads Danske, DZ and Swedbank went out with initial guidance of the 19bp area and revised guidance to 16bp+/-1bp after a little under two hours on the back of more than EUR560m of demand. The order book peaked at around EUR640m, according to a lead syndicate banker, and was around EUR560m when the pricing was fixed at 15bp.

He said this implied a new issue premium of around 1bp, noting that this rewarded investors for participating in the sub-benchmark trade, even if the differential between sub-benchmark and benchmark pricing had narrowed.