Argenta today (Tuesday) generated the biggest peak order book for a single-tranche euro benchmark so far this year, although orders for its €500m no-grow 10 year covered bond fell from above €3.5bn to over €1.8bn as the pricing was tightened 6bp to around fair value and close to core issuance.

Argenta Spaarbank held investor calls for the seven to 10 year Belgian covered bond debut from last Wednesday, and narrowed this down to a 10 year maturity yesterday (Monday) as the virtual roadshow was concluding.

This morning, leads Barclays, Belfius, LBBW and Natixis went out with guidance of the mid-swaps plus 9bp area for a €500m no-grow 10 year mortgage Pandbrieven. After around 35 minutes, books were reported as being over €1.5bn, excluding joint lead manager interest, and after around an hour and 35 minutes, the guidance was revised to 4bp+/-1bp, WPIR, on the back of over €3.5bn of demand, excluding JLM interest. The deal was ultimately priced at 3bp, on the back of over €2bn of demand, excluding JLM interest, and the final book good at re-offer was above €1.8bn, excluding JLM interest.

A syndicate banker away from the leads said it was a fantastic result as demonstrated by the “huge” book peaking above €3.5bn, which at its peak is the most orders for a single-tranche euro benchmark this year – only BPCE SFH has achieved more, on a €2bn two-tranche deal.

“It was obviously good timing,” he said, “and it was also helped by the fact that if there’s one segment of the covered bond market that has been undersupplied, it’s been the Belgians.”

The debut’s outcome is a positive sign for the market, he added, and should encourage other smaller or peripheral names to consider issuance.

“There’s no surprise that a SocGen or a DZ Hyp can do strong deals – of course they can – but if Argenta can do the same, then we have an extremely strong market.”

Other bankers were complimentary about the outcome, but some suggested the starting point was unnecessarily wide, noting the drop of over €1.5bn in the amount of orders when pricing was moved some 6bp from start to finish – the joint largest move of any execution process this year. One said that starting at 7bp would have led to a more “sober and controlled” process and still allowed for pricing at 3bp.

However, another said the cautious approach reasonably reflected Argenta being a new, relatively small issuer and that there was an element of price discovery involved. The end result was meanwhile convincing, he added.

“They were almost four times subscribed,” he said, “so they can’t have done everything wrong.”

A lead banker acknowledged that the starting point was open to question, but also cited the need for price discovery.

Syndicate bankers at the leads put fair value at around 3bp, implying no new issue premium, but stressed that it is difficult to place fair value accurately for the debut, and bankers away from the leads put it at 2bp-3bp over.

The pricing at 3bp is just 2bp wider than where a DZ Hyp €1bn long nine year and a Société Générale SFH €750m no-grow 10 year were priced last week, and a syndicate banker said this was simply a sign of the times.

“Everything from core Europe is more or less trading at the same level,” he said, “so there’s not much differentiation between Austria, Germany, the Netherlands or even the French.

“Yes this may be the tightest Belgian against a German,” he added, “but what exactly does this tell you? That this market is aggressively overboard and that given the supply dynamics, this is not going to change anytime soon.”

Aareal Bank is expected to launch a four year US dollar benchmark-sized transaction tomorrow (Wednesday), after announcing the mandate this morning. Citi, Deutsche, HSBC, LBBW and NatWest have the mandate.

The new issue will be the second US dollar benchmark of the year, following a Deutsche Pfandbriefbank (pbb) $750m (€621m) three year on 19 January, which was priced at 23bp – the tightest spread on a new dollar benchmark Pfandbrief in over 10 years.

Aareal’s last dollar benchmark was issued in April 2019.