Axa Bank Europe SCF and Caja Rural de Navarra encountered modest demand in euros today (Wednesday), with the latter not tightening from initial guidance as the market proved tougher than expected after last week’s change in ECB stance. DZ Hyp meanwhile announced a green debut.

Today’s euro benchmarks are the first to hit the market since hawkish comments from European Central Bank president Christine Lagarde on Thursday, and syndicate bankers said their outcomes showed the primary market to be difficult.

“I’m definitely a bit nervous about the euro market,” said one. “It’s pretty obvious that in covered bonds the time for exuberant or even smooth trades is over – at least for now.”

Syndicate bankers were most surprised about the lack of momentum behind a €500m no-grow seven year deal for Caja Rural de Navarra (CRN), which was announced on Monday and is the first green cédulas.

Leads Banco Cooperativo Español, Crédit Agricole, DZ, Natixis and UniCredit went out this morning with initial price thoughts of the mid-swaps plus 15bp area for the €500m no-grow February 2029 cédulas hipotecarias, expected rating Aa1. After two hours and 45 minutes, they set the final terms for the €500m deal with the spread unchanged at plus 15bp on the back of an order book above €580m, excluding joint lead manager interest. The final book at re-offer was over €700m, excluding JLM interest.

“It was a green seven year, so that should be fine,” said a banker away from the leads. “But it was kind of weird, because they couldn’t generate any excitement and didn’t move the price.

“Many investors clearly just don’t want to engage at the moment.”

A lead banker acknowledged that the outcome fell short of expectations.

“There just weren’t the dynamics required to move to where we wanted,” he said. “Now you just have to make sure you respond properly to what the market demands, and this is what we did.

“So yes, it’s not the fantastic outcome we would have had a couple of weeks or even only days ago, but it’s still a very solid trade.”

He said that based on comparables circulated yesterday – including a variety of cédulas and more recent OBGs – fair value was in the high single-digits or 10bp over mid-swaps, but that a May 2025 CRN issue was at 14.5bp, mid, and that anyone looking at this could have put fair value at around 18bp.

“In the past, there was a similar debate when CRN last came to market four years ago,” he added, “and that time we could ignore the outstanding, but this time, maybe not.”

He nevertheless pointed to the €700m-plus final book in the difficult circumstances as a positive reflection of CRN’s profile, saying that its investor relations efforts and sustainability strategy benefit the infrequent and relatively small issuer.

Axa Bank Europe SCF entered the market this morning following a mandate announcement yesterday (Tuesday), with leads Belfius, BNP Paribas, HSBC, LBBW and SG opening books with initial guidance of the mid-swaps plus 7bp area for the €500m no-grow February 2028 issue, expected rating Aaa. After an hour and 15 minutes, they reported books above €500m, excluding joint lead manager interest. After two hours 45 minutes, they set the spread at plus 4bp on the back of books above €750m, excluding JLM interest. They reported final books above €800m at re-offer, including €27m in JLM interest.

“On the face of it, from guidance of plus 7bp to plus 4bp is fine, and there’s nothing wrong with the six year maturity,” said a banker away from the leads. “but I was a little surprised not to see a bigger book. So there’s a risk we are seeing a bit of hesitancy from investors.

“Maybe it’s a little early for people to take a view on which direction are we going in covered, but I almost suspect that it is more because the last couple of days have been so volatile that people have other problems than looking at a small trade from a rare issuer.”

Another banker said Axa’s deal appeared more dynamic than CRN’s, with the pricing also more straightforward. He saw Axa January 2027s at plus 0.5bp to 1bp over, and put fair value at close to 2bp, implying a new issue premium of around 2bp.

Today’s deal comes after Belgium’s Crelan Group took over as owner of the issuer’s parent, Axa Bank Belgium, on 31 December, in line with a 2019 agreement with Axa Group. Axa Bank Belgium is expected to merge with Crelan SA in 2024, with Axa Bank Europe SCF remaining a subsidiary of Axa Bank Belgium until then.

The new issue has an expected rating of Aaa from Moody’s, which on 4 January downgraded Axa Bank Belgium’s counterparty risk assessment from Aa2 to A1, while S&P on the same day lowered the bank’s issuer credit rating from A- to BBB+, on stable outlook, and removed it from CreditWatch, both aligning the bank’s ratings with those of Crelan.

DZ Hyp is planning investor calls until Friday for an inaugural green mortgage Pfandbrief, a long seven year announced today. DZ Bank and Crédit Agricole are joint structuring advisors, and ABN Amro, BayernLB, NatWest and UniCredit have been mandated as joint bookrunners alongside the two.