Nordea Mortgage Bank today (Thursday) successfully issued the longest dated euro benchmark covered bond since Russia’s invasion of Ukraine a month ago, a €1.5bn seven year deal, while Arkéa Public Sector SCF printed a €500m six year, and further issuance beyond five years is expected.

The last supply beyond of seven years or longer came on the eve of the Russian invasion, when Crédit Mutuel Home Loan SFH priced a €500m 10 year at 8bp over mid-swaps on 23 February as part of a €2bn dual-tranche issue. The longest-dated issue since then was a €1.25bn six year for CFF on 8 March.

A syndicate banker at one of the leads said the new Finnish benchmark was launched on the back of successful issuance of 10 years and longer in the SSA market, and following feedback from investors that they would be open to a seven year trade from a strong Nordic name such as Nordea. The improved tone of the credit market was meanwhile highlighted by the launch of the first euro Additional Tier 1 issue of the year yesterday (Wednesday), a €1bn deal for Intesa Sanpaolo, even if the lead banker said the market in general was a touch weaker today.

Nordea’s deal was announced this morning, leads BNP Paribas, HSBC, LBBW, Nordea and UBS going out with guidance of the mid-swaps plus 8bp area for the March 2029 euro benchmark, expected rating Aaa. After around two hours and five minutes, they reported books above €2bn, excluding joint lead manager interest, and after nearly two-and-three-quarter hours they set the spread at 4bp on the back of books above €2.1bn. The deal was ultimately sized at €1.5bn and the final book good at re-offer was above €2.1bn.

“At the end of the day, we can say the market is open for seven years,” said the lead banker. “Those who gave us the positive feedback were there in the book today, so investors seem to be shifting focus from five years to seven years.

“I’m not sure whether that will last long,” he added, “because we are living on headlines, so to speak – if something arises in connection to Ukraine or CPI data, it maybe will change. But for now, you can print seven years if you are a strong and established name.”

Today’s covered bond is Nordea Mortgage Bank’s first euro benchmark since a €1bn eight year deal in June 2019 and only the second from Finland this year.

According to pre-announcement comparables circulated by the leads, Nordea March 2027s were quoted at mid-swaps minus 4bp, mid, June 2027s at minus 3.3bp, and February 2033s at minus 0.4bp, but the lead banker said the syndicate saw fair value around mid-swaps flat, although it could be seen a little tighter. He noted that the new issue premium was higher than that paid by Crédit Agricole Home Loan SFH for a €1.75bn long five year on Tuesday, but said this could come down for longer dated issuance if the market remains relatively stable.

A syndicate banker said another seven year benchmark could emerge as early as tomorrow (Friday) from a name at a wider spread than Nordea, which he said should help it succeed on the last day of the week.

Arkéa Public Sector SCF’s mandate was announced this morning, and leads Crédit Agricole, Crédit Mutuel Arkéa, DZ, LBBW, Nykredit and Santander opened books with guidance of the mid-swaps plus 9bp area for the March 2028 euro benchmark, expected rating Aaa. After around two hours, they reported books above €800m, excluding JLM interest, and after around two hours and 20 minutes, they set the spread at 5bp for an expected size of €500m on the back of books above €950m. The size was ultimately set at €500m on the back of books around €700m of orders, excluding JLM interest, good at re-offer.

According to pre-announcement comparables circulated by the leads, Arkéa Home Loans SFH October 2027s were quoted at plus 1bp and July 2029s at 2bp, while Crédit Agricole Home Loan SFH’s long five year on Tuesday came at 4bp.

A lead syndicate banker said that while the deal had been a success, the book had built slowly and that, given the modest size of the deal, he had expected it to be priced slightly tighter.

Today’s deals came after Hamburger Sparkasse yesterday priced a €500m no-grow five year mortgage Pfandbrief at 2bp over mid-swaps. Leads BayernLB, Commerzbank, DekaBank, Hamburger Sparkasse and UniCredit built a book above €1.8bn on the back of initial guidance of the 6bp area, and the final order book good at re-offer was above €1.5bn.