At least two euro benchmark covered bonds are expected to be launched into the renewed Eurosystem bid tomorrow (Tuesday), with DZ Hyp having today announced a dual-tranche Pfandbrief split into €500m eight and 15 year tranches, and Caffil expected with its first green covered bond, a 10 year.

Last Wednesday the Eurosystem restarted net purchases under APP and put in primary market orders for 40% of issues from Deutsche Kreditbank and BPCE SFH, at the higher end of what many market participants had anticipated. Analysts now expect purchases to remain at or around the same level for CBPP3-eligible new issues.

A syndicate banker said he expects tomorrow’s deals to go well given a “pretty healthy” market environment and the renewed CBP33 support.

“The ECB bid from last week was higher,” he said, “and given how it ended up supporting the market in 2018, issuers have taken this into consideration in their calculations.”

However, he said that despite initial excitement about the Eurosystem participation, issuers would still exercise caution until a clearer picture of the central bank’s activities is apparent.

“It’s only the beginning, so we need to see how it will work out,” he added.

Indeed, an analyst said that should the Eurosystem change the share of new issues that it bids for, this would be “massive news”, since it would represent a shift away from previous CBPP3 strategy and make the primary market unpredictable for issuers.

DZ Hyp is expected to launch its dual-tranche deal tomorrow, comprising a €500m no-grow eight year mortgage Pfandbrief and a €500m no-grow 15 year public sector Pfandbrief, following a mandate announcement today (Monday). ABN Amro, Deutsche, DZ, Natixis, NordLB and Santander are leads.

Pre-announcement comparables circulated by the leads for the eight year put the German issuer’s August 2027 and March 2028 paper at 4bp and 3bp through mid-swaps, mid, respectively, while its April 2034 paper was at minus 1bp.

“DZ Hyp is one of the prime names of out Germany,” said a syndicate banker away from the leads, “and with expectations of a long-lasting low yield environment, investors will be happy to get the extra yield at the very long end, so this 15 year should be done and dusted in no time.”

Caisse Française de Financement Local (Caffil) said in a post-roadshow update today that it could launch its inaugural green covered bond as soon as tomorrow (Tuesday), having chosen a 10 year maturity for its euro benchmark from the intermediate to long-dated range it had previously flagged. Crédit Agricole, HSBC, structuring advisor Natixis, SG and UniCredit have the mandate for the French deal.

According to pre-announcement comparables circulated by the leads, Caffil’s October 2028 and January 2031 paper was trading at 2.5bp and 2bp over mid-swaps, mid, respectively. Société Générale SFH July 2029 green paper was at 3bp and CRH October 2029 paper at 3.5bp. A syndicate banker away from the leads saw fair value at around 2bp-2.5bp.

“This should work pretty well, especially with the ECB bid,” he said, “and you do have a pricing advantage when approaching green or sustainable investors.”

However, he suggested the outcome could also depend on the size Caffil targets, with the issuer’s deal sizes varying from €500m to above €1bn but green and social bonds often at the lower end of that range.

Arkéa Public Setor SCF began investor calls and meetings for a €500m 10 year no-grow covered bond today, after announcing its plans last Monday (28 October).

mBank Hipoteczny will likely launch a long five year sub-benchmark tomorrow following a fixed income investor call this afternoon. Commerzbank, Erste, Helaba and LBBW have the mandate.