De Volksbank is set to launch the first euro benchmark covered bond since news of a possible Covid-19 vaccine yesterday (Monday) led to a sharp back-up in yields, with the Dutch bank expected to hit the market tomorrow with a €500m no-grow 20 year at rates some 20bp higher than of late.

The mandate was announced this (Tuesday) afternoon and is expected to be launched tomorrow (Wednesday), according to a syndicate banker at one of leads BNP Paribas, DZ, NatWest, Rabobank and UniCredit.

Compatriot Aegon attracted €2.2bn of orders to a successful €500m no-grow five year CPT issue yesterday in the wake of Joe Biden’s US presidential election victory, and subsequent news of the promising Pfizer/BioNTech vaccine boosted risk markets further in the European afternoon.

According to the de Volksbank lead banker, the 20 year swap rate has risen from around minus 7bp last week to 12.7bp late this afternoon.

“It’s all due to this Pfizer announcement,” he said. “It’s a massive swing, no doubt about that.”

He noted that the most recent 20 year – and the last euro benchmark before Aegon’s – a €500m deal from MünchenerHyp on 27 October, was trading two points down on its re-offer price on a cash basis. It was today quoted at around 2bp over mid-swaps, mid, according to the lead banker, in line with its re-offer spread.

The most recent Dutch comparable is a €500m 15 year for NN Bank issued on 16 September, which he said was today at 4bp, while a €750m Caffil 15 year from 12 October was at 5.5bp.

De Volksbank’s €500m no-grow 20 year will be its first covered bond since January 2019, when it sold a €500m seven year, and the lead banker said its rarity should play in the issuer’s favour.

A core European issuer could follow de Volksbank, he added, after circulating an RFP yesterday.

While the covered bond market has proven to be consistently open across the curve, the banker suggested the back-up in yields could make the biggest difference in the 15 year maturity, where swap rates have backed up to positive territory, around 3.5bp today.

“Maybe it brings 15 years back on the agenda,” he said. “Let’s hope it lasts.”