SpareBank 1 Boligkreditt today (Thursday) achieved a similar result to that of compatriot DNB yesterday, albeit via a slightly different route, with both closing with €1.8bn books and priced flat to fair value, but SpaBol’s €1bn 10 year covered bond starting wider and drawing higher peak demand.

The mandate for SpareBank 1 Boligkreditt’s (SpaBol’s) issue was announced yesterday (Wednesday) after DNB had closed books on a €1bn seven year issue. SpaBol leads Citi, Crédit Agricole, Danske and DZ then opened books this morning with initial guidance of the mid-swaps plus 7bp area for the May 2031 euro benchmark, rated Aaa.

After around an hour, they reported books above €1bn, excluding joint lead manager interest, and then after around two hours, they revised guidance to 4bp+/-1bp, will price in range, on the back of books above €1.4bn, excluding JLM interest. Around half an hour later, the spread was set at 3bp on the back of more than €2bn of demand, excluding JLM interest and pre-reconciliation, and the final order book was €1.8bn, including €135m JLM interest.

The 3bp spread was seen by syndicate bankers as flat to fair value, with SpaBol November 2029s at 3bp and SR-Boligkreditt 2031s at 3.5bp. DNB priced its €1bn seven year issue at mid-swaps flat yesterday and a lead syndicate banker said the 3bp pick-up offered by SpaBol also exactly reflected the curve extension from seven to 10 years plus the usual pricing differential between the two credits.

SpaBol’s pricing at fair value, pace of bookbuilding, and final book size matched those achieved by DNB yesterday, although SpaBol started 4bp wider than fair value whereas DNB had started 3bp wider, and SpaBol also achieved higher peak demand, at €2bn, than DNB, which moved in one step from 3bp to mid-swaps flat rather than offer revised guidance.

“This market is one where we are all trying to finesse the last basis point,” said a syndicate banker at one of the leads.

He said the ambition from the start was to price at 3bp, and that the leads were happy to see the book continue to grow when the 4bp+/-1bp guidance was announced.

Another lead banker said that although the final order book ultimately matched DNB’s, the positive yield on SpaBol’s 10 year (0.144%) “ticked the boxes” of some investors who might not have been so interested in DNB’s negative-yielding seven year (-0.115%), and a banker who led DNB’s trade acknowledged that this would have been a factor. The lead banker said some accounts were also attracted by the pick-up SpaBol offers versus DNB.

Whereas some euro benchmarks in the past couple of months have achieved pricing through fair value, bankers said the even tighter levels at which covered bonds are now trading have led some investors, notably bank treasuries, to become increasingly price sensitive.

“‘This far and no further’ is what we are increasingly hearing from accounts,” said a syndicate banker, “while others are waiting to see what the final spread is before joining.”

He said investors are happy to pick up large tickets for covered bonds in the primary market, but are just as content to look at SSAs given the “stretched” valuation of covered bonds relative to the other asset class. Another banker noted that some Nordic SSAs are trading at a pick-up to some Nordic covered bonds.