Resurgent demand for euro benchmarks from Erste, Santander UK and SpareBank 1 Boligkreditt that came flat to through fair value today (Tuesday) suggested, in the words of one syndicate banker, that investors have “thrown in the towel” as they accept yields and spreads will remain low.

The three deals – launched in between UK and French public holidays yesterday (Monday) and tomorrow (Wednesday) – came after Deutsche Hypothekenbank yesterday priced a EUR250m tap of a EUR500m 0.5% June 2026 Pfandbrief at 1bp through mid-swaps. Another syndicate banker involved in one of today’s trades said this was a sign that the “first line of defence” had been breached, with spreads returning to negative territory, albeit for a tap.

“That was a strong statement that investors are keen and willing to buy at these levels,” he said.

A EUR1bn (NOK9.8bn) seven year for SpareBank 1 Boligkreditt (SpaBol) today came at just 2bp over mid-swaps – the tightest spread on a euro benchmark covered bond since January and the tightest non-German spread this year, with a syndicate banker away from the leads noting it implied a SpaBol five year would come in negative territory.

Leads BNP Paribas, Deutsche, ING and UniCredit went out with initial guidance of the 7bp over mid-swaps area, then revised guidance to the 4bp area and set the size at EUR1bn on the back of books over EUR2bn. The deal was then priced at 2bp over on the back of over EUR2.5bn of orders, excluding joint lead manager interest.

The deal was seen coming flat to through fair value, although the syndicate banker away from the leads said that more noteworthy was that SpaBol had priced inside a EUR1.5bn seven year DNB Boligkreditt issue.

“That is a significant statement,” he added.

A EUR500m no-grow 15 year benchmark for Erste Group Bank continued last month’s trend for long-dated supply, attracting over EUR2bn of demand in the first half hour and EUR3bn in the first hour. Leads BayernLB, Crédit Agricole, Erste, Helaba and UniCredit initially went out with a level of 12bp over mid-swaps and tightened to 7bp at the time of the EUR3bn update, before ultimately attracting EUR3.2bn of orders good at the re-offer of 7bp – which a lead syndicate banker said was 1bp inside fair value.

“The long end is really attractive,” said a banker away from the leads. “It’s the only place investors can get any coupon, any spread in the triple-A arena.

“People have thrown in the towel – there are no rate increases visible for a long time, and covered bonds are the place to be.”

Another lead syndicate banker highlighted that the re-offer spread was the same as that on a EUR500m no-grow 15 year for DZ Hyp on 10 April, with the latter being a top German name and with Austrian names – even Erste – typically trading significantly wider – around 7bp according to one analyst today. The lead banker noted that spreads had tightened in the interim, but was still surprised at the strength of demand.

“There was low price sensitivity, even from those investors who had been complaining about the performance of covered bonds and how tight they were,” he said. “Some of them had been staying on the sidelines, but now they are joining in again, afraid of missing out.”

Bankers said Erste had been further helped by announcing its mandate yesterday, with a substantial amount of indications of interest coming in even before any pricing indications were given.

After Yorkshire Building Society attracted some EUR3.5bn of demand to a EUR500m no-grow five year in only the second UK euro benchmark of the year last Tuesday, Santander UK today attracted some EUR4bn of orders to a EUR1bn (£854m) five year.

Leads Danske, Natixis, NordLB and Santander UK started out with a level of the 16bp over mid-swaps area, then moved to 11bp+/-1bp, WPIR, on the back of more than EUR3.25bn of orders, before ultimately pricing the new issue at 10bp over mid-swaps. Although the pricing move was less than that of Yorkshire, which tightened 7bp, Santander UK’s starting point was also deemed overly defensive by some bankers.

A lead syndicate banker said the book ballooned – “as all covered bonds do these days – I wonder why they pay us fees (don’t print that)” – and that there were few drops, with further interest coming in even when pricing was tightened. Another lead banker put the new issue premium at zero.

In light of the buoyant conditions, bankers expect at least one new issue on Thursday and further supply this week or next.

Spain’s Abanca Corporación Bancaria has meanwhile mandated Commerzbank, Crédit Agricole (global coordinator), NatWest and Santander for a roadshow starting on Monday ahead of a debut euro benchmark cédulas hipotecarias in an intermediate to long maturity.