Westpac raised €1.25bn of five year funding in the increasingly normalised primary market today (Monday), after SR-Boligkreditt on Friday followed up on a seven year reopener from Nordea on Thursday, and further euro benchmark covered bond issuance is expected tomorrow.

Westpac Banking Corporation leads Barclays, BNP Paribas, HSBC, UBS and Westpac this morning went out with guidance of the mid-swaps plus 16bp area for the April 2027 euro benchmark-sized Australian covered bond, expected ratings triple-A. After around an hour and a half, they reported books above €1.25bn, and after two hours and 50 minutes, they set the spread at 12bp on the back of books above €1.55bn. The size was then set at €1.25bn (A$1.83bn), with almost €1.4bn of orders, including €65m of joint lead manager interest, good at re-offer.

Westpac’s last benchmark covered bond was a £700m four year floating rate note on 8 March, a day when four issuers were in euros, with covered bonds being one of the only options open to issuers in more volatile markets, noted a syndicate banker at one of its leads.

“It was a reasonably busy day today,” he said, “but covered is now just one of a number of asset classes back functioning. We achieved a reasonable, relatively non-controversial outcome in terms of relative value, book and deal size.

“It’s good for euros to be open for the non-Europeans and still offering good capacity even without the purchase programme.”

A syndicate banker away from the leads saw the outcome as par for the course in today’s market, citing the €1.25bn deal size relative to the near €1.4bn book.

“The general tone is quite constructive,” he said, “but you can’t expect heavily oversubscribed order books. But what demand there is, is very high quality, so you can almost allocate everyone in full – fast money accounts still aren’t playing because they fear spreads could go wider.”

He put the new issue premium at 2bp-3bp. The re-offer spread of 12bp is flat to where National Australia Bank priced the last Australian euro benchmark, a €1.5bn deal also in the five year maturity, on 9 March, and the lead banker said Westpac was happy to achieve a level consistent with its peer.

Nordea Mortgage Bank on Thursday successfully sold a €1.5bn seven year covered bond that was the longest-dated euro benchmark covered bond since Russia’s invasion of Ukraine, but the lead banker said Westpac was happy to raise €1.25bn in five years – rather than potentially €750m to €1bn in sevens – and that the 2027 maturity fit well between 2026 and 2028 outstandings.

SR-Boligkreditt hit the market on Friday morning in the wake of Nordea’s seven year reopener.

Leads Credit Suisse, HSBC, LBBW, NordLB and Swedbank opened books with guidance of the mid-swaps plus 12bp area for the April 2029 euro benchmark-sized Norwegian covered bond, expected rating Aaa. After around an hour and 40 minutes, they reported books above €1bn, excluding JLM interest, and after two hours and 40 minutes, they set the spread at 9bp on the back of books above €1bn, and the deal was ultimately sized at €750m (NOK7.10bn), with a final order book of around €900m.

A lead banker said the outcome was a solid result, with €750m being on the larger side of what SR-Boligkreditt has typically issued. However, he noted that demand was lower than that encountered by Nordea on Thursday.

“Friday can be a bit of a sub-optimal day,” he added, “but we felt there was little benefit in waiting given the upcoming supply.

“Maybe seven years is also a bit more difficult for smaller issuers. Some investors told us that they couldn’t participate because of the maturity, and for others, lines were full for SR, which is a more frequent issuer than Nordea.”

The lead banker saw the new issue premium in the context of 3bp.

“That’s not too bad for SR,” he added, “and is in line with what Westpac paid today.”

Further supply is expected tomorrow (Wednesday) and a syndicate banker said issuers would be well advised to approach the market, agreeing that spreads could widen – even if reported new peace talks between Russia and Ukraine may raise hopes.

“PEPP is being phased out,” he said, “and people are starting to chat about what happens to the CBPP3 order if the settlement date falls into April.

“We are still trading on headlines,” he added. “The negotiations could be a good sign, but an even better sign would be below expectation CPI data from the US and Eurozone this week.”

According to pre-announcement comparables circulated by the leads, SR Bank June 2027s were quoted at 4bp, mid, and September 2028s at 4.9bn, while SEB June 2027s issued last Monday at 5bp were at 3.8bp and Nordea’s new seven year, re-offered at 5bp, was at 3bp.

Skipton Building Society sold its first covered bond since September 2019 today, a £500m (€600m) five year floating rate note. Following initial guidance of the Sonia plus 48bp area, the deal was priced at 45bp on the back of books above £750m.