Societe Generale is expected to issue its latest “positive impact” covered bond tomorrow (Tuesday), a five year green euro benchmark, which could cap a strong year for sustainable issuance in the asset class and provide a last hurrah for the market as it winds down into December.

Only three €500m euro benchmarks have hit the market so far in November, although three Pfandbrief taps have taken total supply to €2.25bn.

“The new issue rush in September and October was unsurprisingly followed by a November tristesse,” said DZ covered bond analyst Thorsten Euler.

However, he noted that deals such as a €500m seven year social covered bond for Yorkshire Building Society on 9 November, the first sustainable euro benchmark from the UK, ensured that “there can be no talk of boredom”.

Indeed, S&P analysts last week noted that sustainable issuance this year has already exceeded combined 2019 and 2020 supply, declaring that “we are in the era of the sustainable covered bond”.

“Issuers want to get more of them into the market. Investors can’t get enough of them. Policymakers want to facilitate their growth.”

Sustainable covered bonds in euro benchmark format

Sources: Bloomberg, S&P Global Ratings

SG’s green covered bond is expected tomorrow following an announcement today (Monday), with ABN Amro, Danske, ING, LBBW and Santander mandated alongside SG, which is sole structuring advisor and global coordinator.

The issuer inaugurated its “positive impact” covered bond issuance in July 2019 with the first green covered bond out of France. The last sustainable euro benchmark issuance was a €500m seven year for Yorkshire Building Society on 9 November.

A syndicate banker at one of SG’s leads said the green nature of the deal had already created good interest in the trade.

According to pre-announcement comparables circulated by the leads, SG paper from 2026 and 2029 – including its green July 2029s – was trading at minus 2bp, mid.

“Let’s see what value green has,” said the lead banker. “I’m not saying it will allow them to price inside fair value, but we’ve seen that it allows investors to stay in the book with a little less price sensitivity, helping issuers secure the best price.”

He noted that a peak €2.5bn book for a €500m no-grow five year Danske Mortgage Bank deal on Wednesday, the last euro benchmark covered bond, had demonstrated strong demand for the maturity, but noted that SG’s new issue will not have the scarcity value enjoyed by the Finnish trade.

SG’s most recent conventional covered bond was a €750m eight year in October that attracted a peak €2.25bn-plus of demand and was priced roughly flat to fair value.

Danske’s deal and a €500m nine year NIBC CPT on Tuesday overcame wider credit market softness last week, but although an ING dual-tranche HoldCo deal today also showed the wider financial institutions market to be open for at a price for well known names, bankers said they do not expect much supply beyond SG’s trade this week.