Hypo Noe attracted some €1.5bn of demand to a €500m no-grow seven year Pfandbrief today (Thursday), with bankers highlighting its quick execution as reflective of the covered bond market’s underlying strength. Hypo Oberösterreich has meanwhile mandated a sub-benchmark green debut.

Following a mandate announcement for Austria’s Hypo Noe Landesbank für Niederösterreich und Wien yesterday (Wednesday), leads ABN Amro, BNP Paribas, Commerzbank, Helaba and UniCredit went out this morning with initial guidance of the mid-swaps plus 7bp area for the €500m no-grow September 2028 mortgage Pfandbrief. After around 50 minutes, books in excess of €1bn were reported, excluding joint lead manager interest. After an hour and 55 minutes, the spread was fixed at plus 3bp, on the back of books above €1.35bn, excluding JLM interest, and orders peaked around €1.5bn.

A syndicate banker at one of the leads said the deal had gone very well.

“It was one of the largest and most diversified order books for Hypo Noe,” he added, “including some participation outside Austria and Germany, too.”

He attributed the deal’s success to the prevailing strength of the covered bond market.

“The undersupply we have seen this year has been helpful,” he said, “as was the reputation of the issuer, which is very strong.”

He put fair value at 1bp-2bp, implying a new issue premium of 1bp-2bp.

A syndicate banker away from the leads put fair value based on Hypo Noe’s curve at around 2bp-3bp, implying 1bp to no new issue premium, but said that recent trades could imply a tighter level for fair value. He noted, for example, that a €500m no-grow eight year green covered bond debut for compatriot Bawag PSK launched on Tuesday of last week (24 August) at mid-swaps flat was trading tighter than re-offer.

“Everything is so tight,” he added, “and Austrian names pay just a little more than German names, so I think that helps a little.

“It was textbook execution,” he added, “a quick update to over a billion, and travelling perfectly in line with recent trades. The maturity was good – we see the five to seven year bracket as the most interesting for investors.”

Execution was quicker than that of a €500m seven year covered bond from Norway’s SR-Boligkreditt yesterday, and syndicate bankers said an ECB order will have helped Hypo Noe’s cause, given its CBPP3-eligibility.

Fellow Austrian Hypo Oberösterreich is set to launch its first green covered bond next week, following a mandate announcement today for a €250m no-grow seven year sub-benchmark. Investor calls will be held next Monday and Tuesday, and Erste, Helaba, LBBW and UniCredit have the mandate.

Bawag’s green debut last week was the first green benchmark covered bond from Austria, but in June, Oberbank issued the first green covered bond from the country, a €250m 10 year sub-benchmark.