DZ Hyp and DBS achieved favourable outcomes for five year trades today (Tuesday) as the covered bond primary market rolled on, with KHFC due with a seven year social benchmark tomorrow and CBA due to launch a rare seven year Sonia-linked issue.

After a mandate announcement yesterday (Monday), DBS leads BNP Paribas, DBS, LBBW, Societe Generale and UBS opened books this morning with initial guidance of the mid-swaps plus 10bp area for the October 2026 Singaporean covered bond, expected rating triple-A. After 40 minutes they reported books above €1bn, and after two hours and 55 minutes set the spread at plus 6bp on the back of books above €1.75bn. The issue was ultimately sized at €750m on the back of a final order book above €1.35bn.

The deal is DBS’s first euro benchmark since November 2017 and bankers said it represented a successful return for the issuer, citing the strength of demand as well as the pricing.

With DBS not having tapped the market for almost four years, its longest dated outstanding euro benchmark was a November 2024, and a lead banker said they therefore looked at other covered bonds from the region to work out fair value. United Overseas Bank (UOB) January 2025s were quoted at 1.7bp, mid, and its December 2027s at 6.9bp, according to pre-announcement comparables circulated by the leads yesterday.

“If you say plus 5bp is fair value, then it’s only 1bp new issue concession,” said a syndicate banker at one of the leads, “so that’s a good result at the end of the day.”

He said the issuer could have even gone for €1bn, while acknowledging some price sensitivity.

“The quality was definitely there in the book,” he added, “but they preferred to do €750m and maybe go down 1bp.”

Following a mandate announcement yesterday, DZ Hyp leads DekaBank, DZ, Erste, ING, Scotiabank and Societe Generale went out this morning with initial guidance of the mid-swaps flat area for the October 2026 mortgage Pfandbrief, rated triple-A. After just over an hour, they reported books above €1bn, excluding joint lead manager interest. After an hour and 35 minutes, they revised guidance to minus 2bp+/-1bp, will price in range, and set the size at €1bn, on the back of an order book of over €1.55bn, including €90m in JLM interest. After an hour and 55 minutes, the spread was fixed at minus 3bp, with an order book above €1.7bn. The final book good at re-offer was €1.6bn, including the JLM interest.

A lead banker said the trade was “spot-on”.

“It speaks for itself,” he added. “It was a very decent transaction, and very carefully handled on the side of the issuer, who struck the right balance between size and price ambitions.”

He said investors appreciated the large size, in particular. Today’s benchmark is the issuer’s fourth of 2021, with its last having been for €750m but the others for €1bn.

“DZ Hyp has perhaps become the only one who does €1bn on a regular basis,” added the lead banker.

Bankers both at and away from the leads put fair value for the trade at minus 4bp, implying a new issue premium of 1bp.

A banker away from the leads suggested that the flat area initial guidance was on the aggressive side, and that a plus 1bp starting point might have helped achieve a tighter final level. However, he acknowledged that this might only have been likely for a smaller size, and the lead banker said the issuer had responded well to investor feedback.

“Squeezing tight to the very last basis point is not what they appreciate.”

Korea Housing Finance Corporation (KHFC) is due to hit the market tomorrow with a seven year social benchmark via BNP Paribas, HSBC, ING, SG and Standard Chartered.

After selling a €1.25bn eight year covered bond earlier this month, Commonwealth Bank of Australia (CBA) is set to tap the sterling market tomorrow with a seven year Sonia-linked benchmark. CBA, Deutsche, HSBC, RBC are active bookrunners, and Standard Chartered passive, according to a mandate announcement today.

Seven year sterling FRN covered bonds remain rare, with issuance typically in the three or five year maturities, the most recent example being a £750m (€888m, A$1.39bn) five year Sonia-linked deal for Royal Bank of Canada priced at 28bp on 12 October.