VUB and the Mortgage Society of Finland put down new pricing markers with covered bond issues today (Wednesday), as pick-ups on their €500m five and €300m 10 year, respectively, proved tempting, and each benefited from improved name recognition, according to lead bankers.

OP Mortgage Bank meanwhile mandated its first green covered bond, with the 10 year issue expected tomorrow via Credit Suisse, HSBC, NordLB and OP Corporate Bank.

After a mandate announcement yesterday (Tuesday), Všeobecná úverová banka (VUB) leads Danske, Erste, IMI-Intesa, KBC and LBBW opened books this morning with initial guidance of the mid-swaps plus 15bp area for the €500m no-grow five year Slovak covered bond. After close to an hour, they reported books above €1bn, excluding joint lead manager interest, and after an hour and three-quarters guidance was revised to 11bp+/-1bp, WPIR, on the back of more than €1.4bn of demand, including €80m JLM interest. The new issue was ultimately priced at 10bp on the back of books above €1.55bn, pre-reconciliation and including €80m JLM interest, and the final book good at re-offer was around €1.3bn.

“The execution showed there was very little price sensitivity,” said a syndicate banker away from the leads. “If you tighten 5bp and retain most of the book, you can see investors believe it offers good value.

“It reflects the reality of the covered bond market.”

He noted that with Crédit Agricole Italia having priced a €500m 12 year issue at 9bp over on Monday of last week (8 March) and taken one of the wider Eurozone jurisdictions into single-digits, Asian and CEE jurisdictions remain rare sources of double-digit spreads.

A lead banker echoed this.

“People were clearly looking at the spread versus other European jurisdictions and jumping on this,” he said.

More than 50 accounts participated, he added, with some placing substantial orders.

“It’s clear that it’s a name that is now recognised in the market,” he said. “People have lines available and anticipate VUB coming roughly once a year, so they were ready to go after the announcement yesterday.”

The euro benchmark is VUB’s fourth, with its last having been a €500m five year in June 2020.

Bankers at and away from the leads put fair value at anything from 10bp to 12bp over mid-swaps, given the relative illiquidity of VUB’s curve and that its June 2025s were seen wide of its June 2029s. According to pre-announcement comparables circulated by the leads yesterday, its 2025s were at 11.5bp, mid, and its 2029s at 10bp, while its March 2024s were at 8.5bp.

“It was a really strong trade,” said the lead banker. “As far as I’m aware, the issuer was very happy with the result.”

The Mortgage Society of Finland (Hypo) attracted more than €1bn of orders to its €300m no-grow 10 year covered bond, allowing leads DekaBank, Natixis, Nordea and Swedbank to tighten pricing from initial guidance of the 10bp area and revised guidance of 7bp+/-1bp to a final spread of 6bp.

According to a syndicate banker at one of the leads, the pick-up offered by the sub-benchmark relative to the respective national champion’s euro benchmark is the lowest paid on a Nordic sub-benchmark, assuming a spread close to flat to mid-swaps for OP Mortgage Bank’s 10 year expected tomorrow and in light of the flat to mid-swaps spread paid by BPCE SFH on a €500m 10 year tranche on Monday of last week.

The order book of over €1bn and 56 investors involved were also new highs for a Nordic sub-benchmark, he said. He attributed the strong demand partly to the lengthy marketing conducted by the issuer ahead of the new issue – the Mortgage Society announced the mandate back in mid-February.

“The issuer wanted to make sure that anyone who had previously said that they didn’t have time to prepare for a sub-benchmark couldn’t make the same excuse this time,” said the lead banker.

The leads put fair value at 4bp-5bp over mid-swaps and said that while pricing 1bp tighter was achievable, the issuer was keen to retain and reward the investor interest it had generated through the whole exercise.

The lead banker also noted the improved demand for covered bonds this week and ongoing supply-demand imbalance, and a banker away from the leads said the timing was fortunate for the issuer, with sub-benchmarks ideally bull market trades.