SR-Boligkreditt priced its largest euro benchmark today (Wednesday), after attracting final demand of €1.5bn to a €1bn 10 year, and achieving pricing roughly flat to fair value, with its relative value and yield highlighted as factors in its success. Hypo Tirol is expected tomorrow with a €500m social debut.

After announcing the mandate yesterday (Tuesday), SR-Boligkreditt leads Commerzbank, Citi, Danske, Nordea and NordLB went out with guidance of the mid-swaps plus 9bp area for a 10 year euro benchmark-sized transaction. After an initial update reported books above €1bn, the spread was set at 5bp on the back of around €1.7bn of demand, including €150m JLM interest. The final book was €1.5bn, pre-reconciliation, including €150m JLM interest, and the new issue was sized at €1bn (NOK10.3bn) and priced at a yield of 0.048%.

The trade benefitted from being a rare 10 year from the Nordic region, according to a lead banker, who said the new issue also offered an attractive yield, for bank treasuries and asset managers, in particular.

“You could say it was spot on, hitting 10 years at the moment,” he said. “And with no competition, we had the momentum to grab volume, and that’s what the issuer decided to do.”

The €1bn issue is SR-Boligkreditt’s largest euro benchmark, following €500m-€750m issues, and the lead banker said every investor type was well-represented in the book.

“We had good granularity,” he added, “so the trade was definitely supported by the fact that issuance is scarce and the market is rock solid.”

A syndicate banker away from the leads acknowledged the strong demand and said the Norwegian issue offered good relative value versus the last 10 year euro benchmark, a €500m debut for Belgium’s Argenta Spaarbank just under a month ago at 3bp, which was this morning quoted at minus 1bp.

“Six basis points more for a top quality Norwegian name?” he said. “I think that seals the deal.”

Fair value was around 5bp, implying no new issue premium, according to bankers at and away from the leads. DNB Bolikgreditt green January 2031s – the last Norwegian 10 year euro benchmark, in January – were seen at around 1bp, and a banker away from the leads said SR typically trades 3bp wide of DNB, with 1bp more of differential accounted for by the green nature of DNB’s bond.

“It’s actually a very good outcome for SR,” he said.

Another banker away from the leads said the pricing was yet another illustration of the compression of covered bond spreads across the curve.

“It’s remarkable, to the extent their long six years and nine years are also at 5bp,” he said. “Given we have no steepness left, 5bp may be fair value, but it’s still somewhat weird to see everything the same, be it five or 15 years.”

Another lead banker said tighter pricing may have been possible for a smaller size, but that the issuer was targeting €750m-€1bn and wanted to maintain a good quality order book.

“There were few drops from the book,” he said. “It was more a matter of investors reducing their order sizes when we went to final pricing.

“While it’s not €2bn or €3bn, a €1.7bn peak is still very respectable for a non-ECB-eligible covered bond.”

Hypo Tirol is expected to launch a €500m no-grow 10 year social covered bond tomorrow (Thursday), after announcing the mandate yesterday and holding investor calls yesterday and today.

The new issue will be the first Austrian benchmark covered bond in social format. ABN Amro, DekaBank, Erste, LBBW and UniCredit have the mandate.

A syndicate banker said the issuer should take comfort from the primary market activity so far this week to proceed with the deal – SR-Boligkreditt’s trade today followed a successful €750m 10 year for UniCredit HVB yesterday.

“The market has the momentum,” he said, “so I think they should go ahead with this tomorrow morning.”

Assuming Hypo Tirol’s deal is launched tomorrow, the week’s euro benchmark supply will reach €2.25bn, which is already €500m greater than the €1.75bn of supply for the whole of February. A syndicate banker said this represents an encouraging start for March.

“It’s a lot better than February,” he said, “but I wouldn’t bet on the momentum continuing.”

Oldenburgische Landesbank AG (OLB) this afternoon announced plans for an inaugural euro sub-benchmark mortgage Pfandbrief with a 10 year maturity and expected rating of Aa1.

Deutsche, DZ and LBBW have the mandate and investor calls are planned tomorrow and Friday.