Nationwide found the 15 year part of the euro market tough going this (Monday) morning, as rates volatility constrained demand and stymied tightening of its €500m deal, but bankers are optimistic about new issues, with Bausparkasse Schwäbisch Hall 12s, a green NN debut and Leeds Sonia due.

Nationwide Building Society leads ABN Amro, Barclays, Deutsche and NatWest announced its deal just before 9 o’clock UK time this morning, going out with guidance of the 22bp over mid-swaps area for a euro benchmark May 2037 transaction, expected ratings triple-A. After around two hour and five minutes, they reported books above €500m, excluding joint lead manager interest, and after close to three hours, the spread was fixed at 22bp and the deal sized at €500m on the back of a book above €550m. The book then grew further to around €650m.

Bankers at and away from the leads attributed the modest demand to rates volatility this morning.

“Sometimes as a syndicate you have to take a view,” said a lead banker, “and obviously the sell-off in rates didn’t help. If you have a move of more than 5bp and you’re out with 15 years duration, you will get a lot of investors becoming nervous all of a sudden and saying, OK, I’m going to pass today and see where rates stabilise before jumping on a trade, and we saw a bit of that today.

“But Nationwide is a top notch credit, with triple-A covered bond ratings, and it has got a few longer dated transactions in the market, so this was really looked at by a lot of investors as an interesting investment opportunity. I wish we’d had a bit bigger an order book, but it was just the overall market nervousness, with the credit weakness setting in a little in rates products as well.”

The transaction is the longest-dated euro benchmark covered bond since before Russia’s invasion of Ukraine, with the last beyond 12 years having been a €750m 15 year deal for ING on 10 February. Since then, the longest-dated euro benchmark was a €1.25bn 12 year for Société Générale SFH on 26 April, which attracted some €2.75bn of orders.

A syndicate banker away from the leads said UK issuer’s “adventurous” 15 year was ultimately a solid outcome, even if demand had disappointed, and he noted that working out fair value was not straightforward.

“I imagine that 22bp over for €500m was probably not what Nationwide had intended to do,” he said. “The rates volatility this morning didn’t help at all, but it seems to me that people also said that 22bp as a starting point was not exactly sexy.”

Nationwide May 2041 paper was seen at around 16bp, but the lead banker said this was “super-squeezed” and more recent issuance from the likes of ABN Amro, Helaba, ING and SG was instead looked at, and a premium added to compensate for the UK covered bond’s CBPP3-ineligibility. ING February 2037s, for example, were seen around 11bp and, adding roughly 5bp for the lack of CBPP3-eligibity, fair value was put at around 15bp.

“I would say 15 years is viable,” said the lead banker, “but only on a more stable day. But there is still a clear preference for shorter duration among investors.”

Bausparkasse Schwäbisch Hall is expected tomorrow (Tuesday) with a €500m 12 year mortgage Pfandbrief, following a mandate announcement today, via leads Deutsche, DZ, Erste, ING and NordLB. According to pre-announcement comparables circulated by the leads, the German issuer’s April 2033s were quoted at plus 1bp.

A lead banker said he expects smoother execution than that of Nationwide today.

“We are talking about a 12 year CBPP3-eligible super-rich issuer here with a €500m no-grow,” he added. “There’ll be enough people who like the name for whatever reason to bring it comfortably over the line.”

Nationale-Nederlanden Bank (NN Bank) is also due, with the first green covered bond from the Netherlands, a €500m no-grow 10 year deal via Credit Suisse, DZ, ING, Natixis and Rabobank. NN Bank July 2030s were seen by the leads at 5bp and September 2035s at 8bp.

Finland’s Oma Savings Bank is planning a €350m no-grow long four year covered bond after investor meetings tomorrow and Wednesday, having mandated Danske, Erste and LBBW, according to a mandate announcement today. Its November 2027s were seen at 4bp.

And Leeds Building Society is set to launch a £500m (€584m) no-grow four year covered bond, after having mandated Barclays, BNP Paribas, HSBC, Lloyds and UBS.