Investors were spoilt for choice today (Tuesday) as the covered bond market enjoyed one of its busiest days of 2021, with HSBC Canada, Prima banka and Aareal issuing euro benchmarks and de Volksbank and Hypo Oberösterreich lining up trades for tomorrow.

After a successful €1bn long seven year BPCE SFH trade yesterday and with a trio of issuers queuing up, bankers had said issuers were keen to hit the market ahead of a European Central Bank governing council meeting on Thursday and take advantage of favourable market conditions, and they did not disappoint.

HSBC Bank Canada began taking indications of interest yesterday (Monday), after a mandate announcement last Wednesday and investors calls. Bookrunners HSBC, BBVA, BMO, CIBC, Danske, Intesa Sanpaolo, LBBW, Natixis and RBC then went out with guidance of the mid-swaps plus 12bp area this morning for the €750m maximum-sized September 2026 euro debut, with expected Aaa/AAA ratings (Moody’s/Fitch).

After 40 minutes, they reported books above €1bn, excluding JLM interest. After two hours and 20 minutes, guidance was revised to plus 7bp+/-1bp, will price in range, for a €750m size on the back of books above €2.4bn, including €65m JLM interest. The spread was ultimately fixed at plus 6bp, on the back of books above €2.6bn, with JLM interest unchanged.

The order book is the largest since the market’s post-summer reopening.

“All in all, a very successful inaugural transaction,” said a syndicate banker at one of the leads.

Some syndicate bankers suggested the 12bp area IPTs were on the generous side, implying a degree of caution, and the lead banker acknowledged that they had been chosen in light of the heavy covered bond pipeline, in euros and dollars, which also included a strong Canadian contingent (see separate article), with early thoughts having pointed to a 10bp-12bp starting point. He noted that 12bp was roughly equivalent to the IPTs for an RBC five year US dollar benchmark today.

Investor feedback had implied a landing 2bp-3bp back of Canadian majors, he said, with these trading around 3.5bp-4bp, mid.

“So 6bp is probably a fair outcome in terms of what investors want to pay for doing a bit of work on a new name,” he added. “The issuer was focused on diversification and leaving a good taste in investors’ mouths so it can return as and when appropriate.”

HSBC Canada’s covered bond issuance has previously focused on the US dollar market.

“It doesn’t have as big a balance sheet or cover pool as the majors,” said the lead banker, “but clearly wants to build a curve in euros – the home of the covered bond asset class. Dollars can be a little bit sporadic, so it makes sense to ensure you’ve got a footprint in the biggest market that is open pretty much come rain or shine.”

After a mandate announcement yesterday, Prima banka Slovensko leads Commerzbank, DZ and LBBW opened books with initial price thoughts of the mid-swaps plus 17bp area for the €500m no-grow September 2027 covered bond, with an expected Aaa rating. After an hour and 15 minutes, books were reported in excess of €900m, excluding JLM interest, and guidance was revised to 14bp+/-1bp WPIR. After an hour and 40 minutes, the spread was fixed at 13bp on the back of books above €1.5bn, including €50 JLM interest. The final book was above €1.95bn, including €50m JLM interest.

“The books were pretty dynamic, close to €2bn, which is definitely a good footprint for a Slovakian issuer,” said a lead syndicate banker.

He put fair value at 12bp, implying a new issue premium of 1bp. The issuer’s only other outstanding euro benchmark, a €500m October 2026 issue, was trading at mid-swaps plus 11.5bp, mid, according to pre-announcement comparables circulated by the leads yesterday, with VUB and Tatra paper trading at around 8bp-9bp in the six year part of the curve.

“It’s pretty difficult these days to pin down fair value as curves are enormously flattened and secondaries don’t always give you a good picture to say the least,” added the syndicate banker.

A syndicate banker away from the leads cited the favourable maturity and pick-up versus other European jurisdictions as factors in the deal’s success.

Aareal Bank yesterday mandated BayernLB, Commerzbank, Helaba, Natixis and UniCredit to lead its new issue and this morning they went out with initial guidance of the mid-swaps plus 3bp area for the €500m no-grow September 2028 mortgage Pfandbrief, with an expected Aaa rating. After one and a half hours, they reported books above €900m, including €200m of joint lead manager interest. After about two hours 10 minutes, with books in excess of €1bn, including €200m JLM interest, they revised guidance to mid-swaps flat plus or minus 1bp, WPIR. After almost three hours, the spread was set at minus 1bp on the back of more than €1bn of orders, pre-reconciliation, including unchanged JLM interest.

Syndicate bankers away from the leads said the deal had gone as expected, achieving a respectable outcome in spite of its oversubscription level being relatively modest. One noted that the €900m book for the €500m no-grow trade was “decent”, but also that JLM interest was €200m and that the CBPP3-eligible deal will have benefited from a sizeable ECB order.

“But nevertheless, safely placed,” he added, “and I will presume it will do nicely in secondary.”

Tomorrow is set to be another busy day, with Hypo Oberösterreich today confirming that it intends to launch its previously announced inaugural green covered bond, a €250m no-grow seven year sub-benchmark, subject to market conditions. And de Volksbank is expected after mandating Commerzbank, Goldman Sachs, LBBW, NatWest and Rabobank for a 20 year benchmark.