A €500m 15 year Pfandbrief from UniCredit Bank Austria and a €1bn green seven year from SpaBol attracted strong demand at minimal and negative new issue premiums, respectively, today (Tuesday), and Bawag, Eika and NN are set to take advantage of the strong market conditions tomorrow.

Today’s two euro benchmarks come after a Caffil €1.5bn long seven year yesterday (Monday), and should the three expected deals hit the market tomorrow (Wednesday), it would make this week the busiest since the week of 15 June.

The surge in primary market activity could reflect issuers still wanting to enter the market ahead of issuance by the European Union and also the start of blackout periods later in the month, according to a syndicate banker.

“The market is extremely strong at the moment,” he said, “so why wait for two weeks or so when you can come now?”

The EU issuance for its SURE programme that was initially expected in the second half of September is now not anticipated until October.

However, another syndicate banker did not agree this had incentivised issuers to enter the market now.

“If the EU starts later, surely this gives you more leeway to react,” he said, “so I can’t see this as the real catalyst for more issuance.”

Another said the influx of covered bonds was overdue after a clear lack of supply since the beginning of September, with many issuers deciding to opt for senior paper or capital trades before covered bonds.

“There’s been a huge backlog,” he said, “as we’re around €30bn down compared to last year.

“But it’s not just the covered space,” he added. “US dollars, German SSA paper, and on the other side euro green paper from a German insurer – all on the same day today, so it seems like the market can digest nearly everything.”

The upswing in issuance came as a surprise to another syndicate banker, who highlighted relatively sombre supply forecasts around the end of the summer break.

“Two weeks ago people were saying there was going to be very little issuance for the remainder of the year,” he said, “but it feels like it’s so strong people are deciding to go ahead anyway.”

After announcing its mandate yesterday, UniCredit Bank Austria (BACA) leads Erste, ING, Helaba, SG and UniCredit this morning went out with guidance of the mid-swaps plus 14bp area for a €500m no-grow 15 year mortgage Pfandbrief. After an initial update reported books over €1bn, a second reported books over €2bn, and that the guidance had been revised to 10bp+/-1bp. The deal was ultimately priced at 9bp on the back of over €2.7bn of orders.

The transaction serves as confirmation of the strength of the market at the ultra-long end of the curve, according to a syndicate banker away from the leads.

“It’s working as good as anything in the belly of the curve,” he said. “It’s a decent result for a €500m no-grow.”

A lead banker said it represented an extremely strong result for the issuer.

“We had books over €1bn in around 30 minutes,” he said, “revised the guidance at €2bn and ended up with one of the strongest books we’ve seen on a 15 year in a long time.”

Syndicate bankers at and away from the leads saw fair value at 8bp-9bp, implying zero to 1bp of new issue premium.

SpareBank 1 Boligkreditt (SpaBol) leads Barclays, BNP Paribas, Swedbank and UniCredit went out with guidance of the mid-swaps plus 12bp area this morning for a seven year euro benchmark-sized green covered bond after announcing the mandate yesterday. After an initial update reported books over €1.5bn, a second update put books over €2.75bn, and the guidance was revised to 8bp+/-1bp. It was ultimately priced at 7bp and sized at €1bn. The final book was over €2.5bn.

The new issue is the Norwegian’s second green euro benchmark covered bond, with the first, a €1bn seven year deal, launched in January 2018.

A syndicate banker away from the leads said limited supply from the Nordic region and the green element ensured the issuer’s success.

“It also is a basis point inside fair value,” he said, “so it’s all plusses, and will inevitably attract investor appetite in the current market.”

Another noted that execution had progressed along similar lines to UniCredit Bank Austria’s, with the exception that the green factor enabled SpaBol to start with a tighter guidance level.

“You could point this out about being somewhat of a difference,” he said, “but apart from that, they were both fairly in line and in sequence with each other.”

Nationale-Nederlanden Bank NV (NN Bank) is set to launch a €500m no-grow 15 year soft-bullet transaction tomorrow after announcing its plans today.

The new issue will be the second transaction off the Dutch issuer’s soft bullet programme, which was finalised earlier this year to replace issuance off a conditional pass-through (CPT) programme and allow for longer-dated issuance. Its inaugural soft bullet, a €500m no-grow 10 year, was launched on 30 June.

A syndicate banker away from the leads said that if successful, the deal could incentivise other Dutch issuers with outstanding CPT covered bonds to look at a similar turnaround in their structures.

“It’s a nice test for NN,” he said, “but it’s an issuer’s market, and they could do a 20 or 30 year if they’d like to, although I think this will be the one people watch the most tomorrow.”

HSBC, LBBW, Natixis, Rabobank and UniCredit have the mandate.

Bawag PSK is set to launch a 10 year euro benchmark-sized transaction tomorrow (Wednesday), subject to market conditions. The new issue will be the Austrian’s second benchmark of the year, following a €500m no-grow eight year in January, and the third benchmark from Austria in 2020, after a €500m no-grow seven year from Hypo Noe in May, and today’s UniCredit Bank Austria issue.

According to pre-announcement comparables circulated by the leads, Bawag January 2028s, October 2029s and June 2034s were at 6bp, 7bp and 9bp, respectively. Erste and UniCredit Bank Austria 2030 paper was at 7bp and 6bp, respectively.

BNP Paribas, DZ, Erste, Helaba and LBBW have the mandate.

Eika Boligkreditt is expected to launch a €500m will-not-grow long seven year transaction tomorrow after announcing its plans today. The new issue will be the Norwegian’s second benchmark this year, following a €500m no-grow seven year deal in March.

A syndicate banker at one of the leads said he had strong expectations for the trade following the outcome of compatriot SpaBol’s today.

“SpaBol went from 12bp to 7bp with a €2.75bn book – wow!” he said.

According to pre-announcement comparables circulated by the leads, Eika Boligkreditt March 2027 and February 2029 paper was at 9.5bp and 13bp, respectively. SR-Boligkreditt June 2027s and Sparebanken Vest Boligkreditt green June 2027s were at 9bp and 8bp, respectively.

Crédit Agricole, LBBW, Natixis, SEB and UBS have the mandate.

This week could see further issuance beyond the three transactions expected tomorrow, according to some syndicate bankers.

“The fact that trades are going so well may at the margin push issuers who were maybe not so convinced into doing in a covered bond,” said one, “so we might see more on that basis.”

Another said he would not be surprised if a stronger name from a different jurisdiction hit the market tomorrow with a shorter maturity, given that its offering would be differentiated from the three announced trades.