Bank of Montreal sold its first euro benchmark in over a year today (Tuesday), a €1.25bn eight year, with a new issue premium of around 2bp for the non-CBPP3-eligible issue deemed progress in the market’s recuperation. Aegon is set to test long end appetite with a 15 year soft bullet debut soon.

Following a mandate announcement for Bank of Montreal (BMO) yesterday (Monday), leads Barclays, BMO Capital Markets, BNP Paribas, Commerzbank, HSBC and LBBW went out this morning with initial guidance of the mid-swaps plus 12bp area for a euro benchmark June 2029 soft bullet issue, rated Aaa/AAA/AAA (Moody’s/Fitch/DBRS). After about an hour and three-quarters, books were above €1.25bn, excluding joint lead manager interest, and after close to three hours, the spread was fixed at 8bp on the back of books above €1.85bn, including €115m JLM interest. The deal was ultimately sized at €1.25bn (C$1.84bn) on the back of books above €1.75bn.

Syndicate bankers at and away from the leads put fair value at around 6bp, with CIBC April 2029s at 5.5bp, mid, according to pre-announcement comparables circulated by the leads. The 8bp re-offer therefore implied a new issue premium of around 2bp.

“We were very happy when we drove the spread down from plus 12bp to plus 8bp,” said a lead banker. “In the end, we left 2bp of new issue concession on the table, which might be a touch tighter than what BPCE paid last week.”

BPCE SFH priced a €1.5bn long nine year green covered bond at 5bp over last Tuesday (25 May), in the first euro benchmark since the covered bond market suffered a drop in demand and repricing the previous week. The French bank was adjudged to have paid a new issue premium of 3bp.

While BMO’s 2bp new issue premium was also more than the near zero paid by issuers before the market’s readjustment, another lead banker said it represented progress in coming with a lower premium than BPCE, particularly with BMO being a CBPP3-ineligible issuer.

However, the recent widening in the market was apparent, with BMO paying 3bp more than the 5bp re-offer of the last Canadian euro benchmark, a €1bn eight year from CIBC on 22 April.

The first lead banker said several accounts dropped or limited their orders upon the move below 10bp, but he took it as a healthy sign that investors are not accepting every last basis point move, and said the leads were still left with a high quality order book.

A banker away from the leads said the deal’s CBPP3-ineligibilty contributed to its success.

“It’s clear that the market likes issuers that are away from the Eurozone,” he said. “There’s a little bit more spread on it, so from a relative value perspective, it makes a lot of sense.”

He suggested that had the issuer not sought such size, it could have achieved even tighter pricing.

“By going for the eight year,” he added, “they are also getting into positive territory, so I’m not surprised to have seen quite a good book.”

The deal was price at a yield of plus 0.056%.

One of the lead bankers said BMO had chosen the eight year maturity to take advantage of the flattish curve.

“All in all, it was a very pleasing print,” he said.

The deal is BMO’s first euro benchmark since a €1.25bn three year in March 2020, and the lead banker said that the mandate announcement on Monday gave investors time to prepare for the new issue and helped the deal’s initial momentum. The new issue comes after BMO on Wednesday announced its second quarter results, as Canadian banks emerged from quiet periods.

Aegon Bank has mandated Barclays, Citi, Crédit Agricole, HSBC and Rabobank for a €500m no-grow 15 year inaugural soft bullet, which is expected to hit the market tomorrow (Wednesday), subject to market conditions. The mandate was announced yesterday, when investor calls commenced.

A syndicate banker away from the leads said the Dutch issuer has been in the pipeline for the last two weeks, but did not come to the market earlier in light of the struggles of RLB Steiermark, whose €500m 20 year issue two weeks ago was the last long dated euro benchmark.

“I’m curious to see how that one will work tomorrow,” he said. “Fifteen years, and anything longer than 10, is doable, but that comes at a cost at the moment. We have seen curves steepening, and I think we need a bit of more NIP on that one.

“The relative value definitely looks better than it was for the RLB Steiermark two weeks ago, but the issuer would be well advised to approach the market carefully.”

Aegon cited an interest in issuing in longer maturities when it announced its move from issuing conditional pass-through covered bonds to soft bullets.