KHFC is planning a five year euro social covered bond after an investor call on Wednesday and NN Bank has completed the establishment of a new programme, but bankers were today modest in their expectations for issuance this week after a less than stellar performance from last week’s supply.

Korea Housing Finance Corporation (KHFC) this (Monday) morning announced that it will be holding a series of fixed income investor calls on Wednesday for a five year Reg S/144A euro-denominated social covered bond, but did not specify a size. BNP Paribas, DBS, HSBC and ING have the mandate.

The new issue will be the South Korean’s second covered bond of the year, following a €1bn five year social covered bond on 29 January.

Nationale-Nederlanden Bank (NN Bank) on Thursday published the prospectus for a new €7.5bn soft bullet covered bond programme, and market participants said the Dutch issuer is now ready to issue off the programme.

Six new euro benchmarks were launched last week, making for the busiest week in the market since January, but a syndicate banker today noted that while a couple were trading a basis point or two tighter, the others were flat to slightly wide of re-offer levels.

“It’s decent, but it’s obviously not stellar,” he added. “Nothing has totally fallen off the chair yet, but only two from last week’s supply have performed in secondaries.

“Nobody is really buying now with the expectation they will perform. The situation’s still positive, but it’s clear that issuers have to be a little more careful now.”

Another syndicate banker echoed this and said the pace of supply is likely to ease.

“The general consensus is that it doesn’t feel too appealing,” he said, “so my expectations for supply this week is somewhat neutral.

“It’s very clear that covereds are holding around re-offer,” he added, “and if you are content with stable, sideways-moving spreads, you can go for them, but if you are looking for imminent performance, then you probably put your money in a higher beta green senior.”

He cited, for example, a €500m no-grow green four year transaction from Hypo Noe issued on Thursday that had tightened some 8bp from a re-offer of 80bp over by the end of last week.

Strong prints are more feasible in the €500m-€750m range, said another syndicate banker, but any issuer seeking to launch a larger deal should exercise caution, given the degree of price sensitivity Caffil and UniCredit HVB experienced last week when launching €1bn-sized transactions.

“Even if you have the expected follow-up interest from your respective central bank,” he said, “we are getting to valuations that are quite tight. When you cross-check where these deals are coming versus where the German Länder are trading or getting deals done, it looks as if covered bonds are starting to be quite expensive versus some other asset classes.”

The pace of primary market supply witnessed last week is not expected to carry over to this week, according to the syndicate banker, although deals at the long end of the curve are the most likely to hit screens, as well as issuers not eligible for CBPP3 purchases.

“TLTRO is only helpful up to four years,” he said, “so if you want to go longer at extremely aggressive levels, a covered bond is the next best thing.

“Non-CBPP3 eligible SR-Boligkreditt fared quite well, too, last week,” he added, “so we could see more deals of this variety.”

Higher new issue premiums might be expected, said another syndicate banker, given uncertainty around the path of the coronavirus pandemic, with indices suggesting risk-averseness.

“There’s so many headlines that can make an impact,” he said, “be it a second wave, US-China relations, or Q2 numbers. I think the second half of this year will be a lot more challenging.”

TSB on Thursday gained approval to switch the basis for a £500m (€552m) December 2022 FRN from Libor to Sonia at an adjourned meeting, after the initial bondholder meeting on 3 June was inquorate. The bond is one of only two TSB covered bonds outstanding, the other being a Sonia-based FRN sold last year.