Covered bonds hit the ground running for May today (Tuesday), with a Berlin Hyp social debut giving the issuer its biggest book for a mortgage Pfandbrief and SCBC issuing its largest euro, while a La Banque Postale green debut, Hypo Vorarlberg and SpaBol are due in the bullish market.

The new month’s supply, in the 10 year part of the curve, comes after the long end of the market was reopened by a blow-out €1.25bn 12 year for Société Générale last Tuesday and Deutsche Kreditbank then issued a successful €500m 10 year social mortgage Pfandbrief on Thursday.

Berlin Hyp announced the mandate for its first social bond yesterday and, after investor calls, leads ABN Amro, Commerzbank, Crédit Agricole, JP Morgan and LBBW opened books this morning with guidance of the mid-swaps plus 6bp area for the May 2032 euro benchmark-sized mortgage Pfandbrief, expected rating Aaa. After around half an hour, they reported books above €1bn, excluding joint lead manager interest, and after around an hour and 10 minutes, the spread was set at 2bp for a €750m issue size on the back of books above €2bn. The final book was above €2.8bn, excluding JLM interest.

With affordable housing in Germany and the Netherlands as use of proceeds, the German lender’s social bond comes after pioneering trades in green covered bonds and sustainability-linked issuance, making it the first bank in Europe to issue in the three ESG formats, according to the issuer.

“It’s great that an issuer like Berlin Hyp, who has been at the forefront of green and sustainable bonds, is now tackling social bonds,” said a banker at one of the leads, “and it’s clear that investors are going beyond green in a big way these days.”

The order book comprised over 100 investors and is the biggest achieved by Berlin Hyp on a mortgage Pfandbrief.

“We are very pleased that we were able to complement our ESG refinancing product range today with the successful issuance of our first social Bond,” said Maria Teresa Dreo-Tempsch, member of Berlin Hyp’s board of management responsible for capital markets. “We are thus taking a decisive step towards integrating sustainability holistically into our core business and making our contribution as a bank to the social challenges of our time.

“For us, this is a clear vote in favour of further intensifying our commitment to affordable housing.”

Berlin Hyp’s new issue is the second benchmark mortgage Pfandbrief in social format, after neighbour DKB’s deal last week, which was focused on lending to municipal housing companies in Berlin.

That was priced at 3bp over mid-swaps and had tightened to 1.5bp, mid, according to pre-announcement comparables circulated by Berlin Hyp’s leads, while the latter’s green September 2030s were quoted at minus 1bp, mid, and its January 2031s at mid-swaps flat, and BayernLB April 2031s at minus 1.5bp. A banker at another of Berlin Hyp’s leads suggested the new issue might have come a touch tighter had DKB not priced at 3bp.

He said the pricing 1bp inside DKB was in line with expectations and noted that the level of demand had allowed Berlin Hyp to achieve the upper end of its size ambitions, while the issuer could also extend its ESG curve with the 10 year maturity. A syndicate banker away from the leads said the execution had gone very much in line with his expectations.

Swedish Covered Bond Corporation (SCBC) hit the market with its short 10 year deal this morning, leads Credit Suisse, Danske, Goldman Sachs, LBBW and NordLB going out with guidance of the 15bp area for the February 2032 euro benchmark-sized mortgage covered bond, expected rating Aaa. After around half an hour, the leads reported books above €1bn, excluding JLM interest, and after around an hour and three-quarters, the spread was set at 11bp on the back of books above €2bn. The size was ultimately set at €1.25bn (SEK13bn) on the back of a final book of more than €2.3bn, excluding JLM interest and pre-reconciliation.

The Swedish issuer waited to see how Berlin Hyp’s pre-announced deal was progressing before entering the market, according to a syndicate banker at one of SCBC’s leads.

“By the time we opened books, the BHH trade was almost covered,” he said, “and that gave us a lot of comfort for this window today. So we proceeded and I think the numbers speak for themselves.”

The deal is SCBC’s largest euro benchmark and the book is the biggest it has achieved on a euro benchmark, while it is believed to be the biggest Swedish euro benchmark in the 10 year part of the curve since a €1.25bn 10 year for SEB in 2011. It is also only the second euro benchmark from the country this year, following a €1.5bn five year from SEB on 21 March – SCBC’s last euro benchmark was a €1bn long eight year in June 2021.

Another lead banker noted that the domestic Swedish market does not normally provide for funding in size at 10 years, and also that the krona market was still adjusting in the wake of a surprise Riksbank 25bp rate hike on Thursday.

According to pre-announcement comparables, SCBC March 2030s were trading at 6bp and its April 2033s at 8bp, while the leads also cited Norwegian 2031-2032 paper trading at 7bp, and lead bankers put fair value at 8bp or marginally tighter.

The first lead syndicate banker said that 11bp was the expected landing point for the new issue, but that a smaller deal would have been possible at 10bp. He said the issuer had initially indicated a maximum size of €1bn, but upsized the trade on the back of the size of the book, which included more than 70 accounts.

A syndicate banker away from today’s trades said that aside from SCBC paying perhaps a basis point more due to its size, the new issuance in aggregate reflected the strength of the market.

“It’s definitely a green light for every transaction,” he added.

He noted that even a Raiffeisen Landesbank Vorarlberg sub-benchmark, €300m no-grow five year mortgage covered bond today had attracted more than €1.4bn of orders.

The mandate was announced yesterday and leads BayernLB, Erste, Helaba and RBI opened books with guidance of the 14bp area. After around 35 minutes, the leads reported books above €1bn, including €95m of JLM interest, and after an hour and a half, the spread was set at 9bp on the back of books above €1.4bn, including €97m of JLM interest.

According to pre-announcement comparables, Bawag PSK €750m July 2028s issued last month were at 5bp, RLB NÖ-Wien €500m January 2029s and Hypo Vorarlberg €500m October 2029s at 9bp, and Oberbank €250m May 2029s issued last month at 9bp.

Another banker said the pricing of RLB Vorarlberg’s sub-benchmark arguably reflected a tightening versus recent Austrian supply, and that this bullish sentiment was contributing to order books building at speed in the past week.

“The fast money community is coming back and playing hard, hoping for a quick profit,” he said. “They quickly get the book to a number that you can then show to other investors who are not yet decided.

“Everyone’s expecting wider spreads through the year,” he added, “but right not it feels like spreads are going even tighter, narrowing a bit.”

Meanwhile, the 10 year part of the curve is enjoying particularly buoyant demand.

“Rates have been going up and at some point investors want to dip their toes in,” said another banker. “I don’t think anyone is calling a top on rates, but if you’ve not been active in April, this is as good an entry point as any other – we haven’t quite got to 2% coupons, but we’re pretty close.

“Another factor at play is the relative value versus government bonds and SSAs – that used to be more interesting in the five year part of the curve, but it is now also a little bit further along the curve.”

The success of the latest euro benchmark covered bonds also contrasts with more difficult conditions in other parts of the FIG market, noted bankers.

“You only have to look around the corner to senior unsecured where things are looking exactly the opposite,” said one. “Those that are opting for covereds are doing so for good reason.”

La Banque Postale Home Loan SFH is set to launch its inaugural green euro benchmark covered bond, after having mandated BBVA, Commerzbank, Crédit Agricole, Deutsche, ING and La Banque Postale as leads for a eight year issue, according to an announcement today.

According to pre-announcement comparables, the issuer’s October 2028s were quoted at plus 2.5bp and October 2029s at 4.5bp, while green Caffil, Crédit Agricole and SG 2029-2030 issues were all seen at 3bp.

Hypo Vorarlberg has mandated Erste, Helaba, LBBW, RBI and UniCredit for a €500m no-grow six year mortgage Pfandbrief. Its July 2026s were seen at plus 4.5bp, May 2027s at 7bp and October 2029s at 8.5bp, with a lead banker putting fair value at 7.5bp-8bp.

And SpareBank 1 Boligkreditt (SpaBol) is set for a 10 year euro benchmark via Crédit Agricole, Citi, Deutsche and Nordea.