A UniCredit Bank AG (HVB) €500m no-grow five year Pfandbrief today (Monday) provided a defensive but encouraging start to what is set to be a short yet busy week for euro covered bonds, with four confirmed mandates expected to be executed this week.

Issuers again achieved mixed results with euro benchmarks last week – ahead of a public holiday in parts of Europe on Thursday and many market participants taking long weekends – and the first euro benchmark to hit the market this morning proved to be something of a safe bet.

“It almost doesn’t get more defensive than a €500m no-grow five year from a German issuer,” said a syndicate banker at one of the leads.

Leads ABN Amro, Danske, Helaba, NordLB and UniCredit announced a €500m no-grow June 2027 mortgage Pfandbrief, expected rating Aaa, with guidance of the mid-swaps plus 5bp area. After a little over an hour, they reported books above €800m, excluding joint lead manager interest, and after around an hour and 40 minutes, they revised guidance to plus 1bp+/-1bp, will price in range, on the back of books above €1.2bn, including €75m of JLM interest. They then set the spread at mid-swaps flat on the back of some €1.15bn of orders, and the final book good at re-offer was above €935m, including €75m of JLM interest.

The lead banker said the deal took advantage of a less volatile backdrop to achieve a better outcome than some recent trades.

“We’ll settle for stability these days,” he said. “The break did everyone some good and we also had more constructive news out of China and in the US there’s some speculation that we might have seen a bit of a peak in inflation.

“These are small things, but compared to the last couple of weeks, when it’s been all bad news, this was at least a little bit more comforting, and intraday volatility in the market is much lower, with positive moves during the day versus the last few sessions.”

He said this enabled HVB to enjoy good momentum from the outset and to achieve a better than expected result, moving 5bp to achieve a new issue premium that bankers at and away from the leads put at 2bp. According to pre-announcement comparables circulated by the leads, HVB’s February 2027s and November 2027s were quoted at minus 2bp.

The deal also benefited from the Eurosystem maintaining its 30% order. Settling on 7 June, it is the first CBPP3-eligible benchmark with a settlement date in the coming month, which had again raised the prospect of the Eurosystem cutting back on primary market orders as the broader Asset Purchase Programme is tapered.

A syndicate banker away from the leads noted the drop in the order book upon final pricing.

“It didn’t give the impression of being super-dynamic,” he added, “but then again that’s probably what we have to settle for at the moment.”

Indeed, the lead banker said that had HVB been targeting a larger deal, it would have been a very different proposition.

“We were north of €1bn during the process,” he said, “but a €1bn trade won’t get done at those prices – there would have been a higher concession and smaller oversubscription, for sure.

“But all in all, well done for the first trade, and it gives some comfort to the market that investors are there and see value in covered bonds. So with a pragmatic approach to pricing and sizing, you can get a good trade away.”

Euro issuance this week is expected to be confined to the first three days, with public holidays in the UK on Thursday and Friday. However, Austrian, Australian, Canadian and Danish deals could all hit the market before then.

Bawag PSK has mandated Citi, DZ, Erste, LBBW, NordLB, RBI and UniCredit for a March 2030 (7.75 year) euro benchmark, while Royal Bank of Canada is due with a seven year euro benchmark via Commerzbank, DZ, ING, LBBW, RBC, Santander and SG.

Following investor marketing last week, Bank of Queensland provided an update today on its plans for a five year conditional pass-through (CPT) euro benchmark, flagging feedback in the context of mid-swaps plus the high 20s and execution as early as tomorrow.

Danish Ship Finance (Danmarks Skibskredit) is planning a €500m no-grow five year shipping mortgage-backed deal after investor calls today and tomorrow, in conjunction with a switch tender offer, following a similar exercise in October. It has offered to buy back up to €100m of its outstanding 0.25% September 2022 and 0.125% March 2025 issues.

ABN Amro, Credit Suisse, Danske and LBBW are leads.