Oma Savings Bank is set to launch a sub-benchmark as early as Wednesday, after announcing plans for a five year euro today (Monday), but no euro benchmarks are expected, despite conditions remaining constructive, with sentiment boosted by news of a second promising Covid-19 vaccine.

The Finnish issuer’s forthcoming deal will be its fourth sub-benchmark, the last having been a €250m three year on 1 April.

Oma, Finland’s largest savings bank, will follow compatriot OP Mortgage Bank into the primary market, the latter having on Thursday provided the first Finnish supply in almost 10 months, a €1.25bn 10 year transaction.

A banker at one of Oma’s leads said the transaction is well-positioned to succeed and will likely be sized between €250m and €300m.

“It’s a perfect market for sub-benchmark deals,” he said, “and this is a sub-benchmark issuer almost by definition, so it suits them better.”

Danske, LBBW and Swedbank have the mandate, and today began a series of investor calls that will continue tomorrow (Tuesday). The new issue can be expected to hit screens as early as Wednesday, according to the lead banker.

“It’s not a massive undertaking with a roadshow,” he said, “as they’re not completely new to the market, but it’s also not a name you follow on a daily basis.”

Another lead banker said the new issue from “national champion” OP, which was re-offered at 2bp, provides a good starting point for pricing.

“Then we have to figure out with investors what the pick-up is,” he said.

According to pre-announcement comparables circulated by the leads, Oma’s April 2024s, its longest-dated issue, were trading at 4.2bp, mid, while OP September 2025s were at minus 4.1bp.

European stock markets hit an eight-month high this afternoon on the back of early data from a Moderna coronavirus vaccine trial showing it to have an effectiveness rate of around 95%, a week after reports of an encouraging Pfizer/BioNTech vaccine was similarly hailed by investors.

However, a syndicate banker said this had little material impact on covered bonds.

“Spreads have been super-resilient as of late,” he said, “and as there is absolutely no liquidity drain to be expected in the foreseeable future, I believe we’ll just chug along and continue what we’ve been doing rather successfully for the last couple of months.”

Another syndicate banker noted that after rates backed up on news of the first promising vaccine – enabling covered bond issuers last week to show relatively high positive yields – they have since retraced, with the 10 year Bund yield, for example, moving from around minus 0.47% to minus 0.55%

“This is a little disappointing,” he said, “as it’s better to have some yield for investors rather than showing nothing, so I would say it’s probably just stocks gaining from this news.”

Euro covered bond supply is widely expected to remain considerably limited for the remainder of the year and unlikely to reach €100bn, despite the recent smattering of issuance, given that the majority of issuers are restricting new issue sizes to €500m. Year-to-date euro benchmark supply today stands at around €90bn.

“OP last week with €1.25bn was definitely an outlier in this respect,” said the syndicate banker, “so I think we’ll fall short of €100bn, which I do not deem a major surprise.”

The market remains constructive, he added, with every recent transaction having been executed smoothly, spreads remaining tight, and minimal to new issue premium being paid.

“They are nailing bonds flat to their curve of even through,” he said. “In particular at the long end, there are opportunities to beat your own theoretical fair value.”