The euro benchmark covered bond market sprung to life today (Tuesday), as four deals – from KHFC, Lloyds, Nordea and SMBC – hit the market and three were teed up for launch tomorrow, with markets buoyed by global economic news and issuers keen to tap the pre-summer window.

Only one euro benchmark – a EUR500m Slovenská sporiteľňa debut – had hit the market since lacklustre deals for SCBC and UniCredit Bank Austria highlighted prevailing difficult market conditions on 28 May.

However, markets opened positively this week, with growing expectations of a Fed rate cut helping after dovish ECB noises last Thursday, alongside perceived improvements in US trade tensions with Mexico and China.

“After several weeks of widening and jitters, it’s good to see demand coming in again, and relatively limited new issue premiums,” said a syndicate banker on one of today’s deals.

Nordea Mortgage Bank, for example, achieved a new issue premium of 2bp on a EUR1bn eight year Finnish covered bond. Leads Credit Suisse, Deutsche, HSBC, Natixis and Nordea initially went out with guidance of the 7bp over mid-swaps area and were able to price the issue at 3bp on the back of books that peaked above EUR1.7bn, of which over EUR1.4bn from around 70 investors was good at re-offer.

A lead banker noted that the deal had done well in spite of being the tightest in heavy FIG supply today, not only in covered bonds.

“But finally we had a book as big as Lloyds,” he said, “and it was cool to see that.”

The eight year deal allowed Nordea to offer a coupon of 0.125% and yield of 0.143% as well as the positive spread, and fitted its ALM needs, he added.

Lloyds paid a slightly larger new issue premium, of 3bp-4bp, on its EUR1bn seven year UK deal, and tightened pricing 3bp from the middle of guidance of the mid-swaps plus 20bp area to 17bp, with the final book standing at EUR1.2bn, including 55 orders, down from a peak above EUR1.4bn.

“Not too long ago some trades were pricing flat to curve, and some through at the long end,” said a lead syndicate banker. “But ever since rates dropped to where they are, people have become more sensitive to spreads.

“Moves of 5bp-6bp are a thing of the past. What counts is that these deals are decently placed.”

Korea Housing Finance Corporation issued its second euro benchmark social covered bond, a EUR500m no-grow five year via BNP Paribas, DBS, ING and SG. Pricing was tightened from the 35bp area to 25bp.

And SMBC issued its second euro benchmark covered bond alongside a US dollar debut (see separate article).

Mandates for three further deals that are expected tomorrow were announced today, continuing the heavy traffic.

“There were many other windows when issuers could have come,” said one syndicate banker, “but unfortunately it is out of our hands. People are trying to catch the last window before the summer break as there’s no reason to expect things to materially improve.”

Germany’s Aareal Bank has mandated DekaBank, DZ, HSBC, NordLB and UniCredit for a EUR500m no-grow mortgage Pfandbrief, while Finland’s SP Mortgage Bank is expected with a EUR500m no-grow seven year via BNP Paribas, Deutsche, LBBW and Nordea.

And Austria’s Bawag has mandated Barclays, DZ, ING, LBBW and UniCredit for a EUR500m no-grow 15 year trade, which a banker away from the leads said should be an interesting test of the long end.

“At these levels and these spreads, are investors still in the mood for 10 years and longer?” he said. “I’m not convinced, but I hope so for Bawag’s sake.”