KHFC launched the first Asian covered bond since the onset of the Covid-19 pandemic today (Monday), a €500m no-grow five year social bond with use of proceeds taking in those vulnerable to the impact of the pandemic. Deals from Berlin Hyp and NN Bank are expected as early as tomorrow.

Today’s issue was the fourth euro covered bond benchmark Korea Housing Financing Corporation (KHFC) has launched under its social bond framework, although the issuer in this instance linked the deal to the Covid-19 pandemic, with low to moderate income households and disadvantaged groups in Korea who may be vulnerable to it benefiting from the proceeds.

After announcing the mandate on Monday of last week (22 June) and holding investor calls on Wednesday, KHFC leads BNP Paribas, DBS, HSBC and ING went out with initial price thoughts of the mid-swaps plus 37bp area for a €500m (KRW676bn) no-grow five year social covered bond. After around two hours, books were reported as being over €500m, and after around three and a half hours, the guidance was set at 35bp+/-1bp, on the back of over €650m orders. The deal was ultimately priced at 35bp.

A syndicate banker away from the leads said that although the trade was relatively solid, he had expected to see more demand given that the spread on offer was at the higher end of the covered bond market.

“They did a deal in January which was also in social,” he added, “so this may be a reason why there were smaller orders today.”

KHFC’s last covered bond, launched on January 29, was a €1bn five year social bond.

“It’s still building its curve,” said the syndicate banker, “and you also have the lack of LCR eligibility to consider, which can be an issue.”

Lead bankers acknowledged the trade was no blow-out, and that some investors said they did not have much space in terms of credit lines on the name following its deal earlier this year.

“Some orders were slightly smaller than we’re used to on the Korean trades,” said one, “but the book was OK, and of decent quality.”

He put fair value at 32bp-33bp, based on KHFC’s outstanding 2025 social bond at 31bp-32bp, and said the 2bp-3bp of new issue premium was roughly in line with that offered by the past two euro benchmarks, a €750m seven year from SR-Boligkreditt on 18 June, and a €1.25bn 10 year transaction from Rabobank on 24 June.

“We’re happy with it as the pricing made sense,” he added.

Given how tight spreads are and how low yields are, the deal did not offer the most “juice”, said another lead banker. It nevertheless got done at a level in line with KHFC’s wishes, he added.

“It’s kind of workmanlike in that sense” he said. “But much of that is pretty similar to a lot of trades of late – there’s less enthusiasm for the product at the moment.”

He noted the South Korean deal is the first covered bond to be issued from Asia since the onset of the coronavirus pandemic.

“It also adopted a feature for use of proceeds to support the nation’s Covide-19 response,” he said, “so that’s all good.”

After publishing the prospectus for a new €7.5bn soft bullet programme on 18 June, Nationale-Nederlanden Bank (NN Bank) today announced its plans for an inaugural €500m 10 year transaction.

According to pre-announcement comparables circulated by the leads, ABN Amro September 2030s and Rabobank August 2030s were at 3.5bp and 7.5bp, respectively, and ING Belgium February 2030s at 7bp. De Volksbank March 2028s and October 2031s were at 11bp and 13bp, respectively.

A lead banker said de Volksbank is the main comparable, as it has a soft bullet programme and a similar business model.

“From the investor feedback that has come in,” he added, “it looks like it is going to come wide of all the core Dutch names, but if we can land it around de Volksbank, that will probably make sense.”

BNP Paribas, ING, LBBW, Rabobank and Unicredit have the mandate.

Berlin Hyp (BHH) is expected to launch a €500m no-grow eight year green mortgage Pfandbrief as early as tomorrow (Tuesday), subject to market conditions, after having announced its mandate today.

The issuer has been planning a longer-dated deal after a buy-back of some €303m of short-dated Pfandbriefe in a tender.

According to pre-announcement comparables circulated by the leads, its February 2027s, green July 2027s, and May 2029s were all at 4bp over.

ABN Amro, Commerzbank, Crédit Agricole, DZ and LBBW are the leads.