Clydesdale today (Tuesday) successfully issued the first benchmark covered bond since financial markets were roiled by central bank meetings last Thursday, an upsized £600m five year FRN, while Axa Bank Europe SCF has joined CRN in the euro pipeline, with a €500m six year expected tomorrow.

Following a mandate announcement yesterday (Monday), Clydesdale Bank leads Barclays, HSBC, Lloyds and NatWest this morning went out with initial guidance of the Sonia plus 30bp area for the January 2027 sterling benchmark covered bond, expected ratings triple-A. The spread was fixed at plus 28bp on the back of books over £750m, and ultimately sized the floater at £600m (€710m), with the final book some £725m.

The deal is the first new benchmark covered bond since the Bank of England and European Central Bank both took more hawkish than expected monetary policy stances last Thursday.

“This morning the tone felt good, more stable,” said a banker at one of Clydesdale’s leads, “and there’d been good investor engagement yesterday, which gave us confidence to move into the marketplace. And a short-dated covered floater is just the ticket against this backdrop.

“They started at Sonia plus 30bp, which is in line with sterling covered, and we saw very solid book growth – £600m before 10.30. We then set the spread at 28bp, just to take one variable off the table and enable us to focus on size.”

The pricing is 1bp wider than that achieved by Yorkshire Building Society in the last UK sterling issue, a £500m deal on 11 January that was the tightest ever five year Sonia-linked covered bond, at 27bp.

“It is a very attractive level for the issuer,” said the lead banker, “and it was very pleasing for them to be able to upsize the transaction.”

“This is their first visit to the sterling covered bond market in three years,” he added. “so hits the scarcity value box. We offered up investor calls just to make sure everybody was ready for the trade.”

Although benchmark covered bonds were issued by Clydesdale Bank in 2012, the new issue is off the programme established in 2017 by Virgin Money, which merged with Clydesdale in 2019. The last issue from the programme was a €600m seven year in September 2019 and the last and only in sterling was a £500m five year Sonia-linked deal in March 2019.

The lead banker said market sentiment had now improved after taking a hit on the back of the central bank meetings, providing opportunities in the primary market for issuers.

“We have now seen a turn in market sentiment, and it’s definitely feeling more buoyant,” he said. “A period of calm is required and stability, which we’ve got at the moment, and hopefully we are back in business – it will be a little bit wider, but we are seeing stuff move tighter today in euros and sterling.”

Axa Bank Europe and Caja Rural de Navarra could restart euro benchmark issuance tomorrow with the first new issues since a €750m five year CCDJ trade last Tuesday (1 February).

Axa Bank Europe SCF is planning a €500m no-grow six year issue of obligations foncières, with Belfius, BNP Paribas, HSBC, LBBW and SG as leads, according to a mandate announcement today.

According to pre-announcement comparables circulated by the leads, Axa January 2027s were quoted at plus 0.5bp, mid, and March 2029s at plus 1bp.

After announcing its plans to issue the first green cédulas hipotecarias, Caja Rural de Navarra (CRN) concluded investor meetings today and, according to an update, could hit the market as early as tomorrow with its seven year deal, subject to market conditions.

According to pre-announcement comparables circulated by the leads today, Eurocaja Rural sustainable September 2031s issued last September were quoted at plus 8bp, mid, Abanca May 2029s were at plus 5bp, and Unicaja Banco September 2029s at plus 12bp – all are rated Aa1, in line with CRN. April 2029 Bonos were quoted at plus 13bp, while the most recent peripheral issue, Crédit Agricole Italia January 2023s, rated Aa3, were at plus 8bp.