The primary market proved tough today (Wednesday), as Caffil tested the long end of the market and Sabadell offered rare Spanish supply, with oversubscription levels limited for both, while a HCOB €500m ship Pfandbrief and a Raiffeisenverband Salzburg sub debut achieved modest successes.

One syndicate banker noted that a sign of the difficulties faced by issuers today was that updates were thinner on the ground than usual, including precision on exactly how much was allocatable at re-offer.

“Overall, it’s a bit of an exhausted market,” he said. “Today’s transactions were solid, at best, and some of them did not even reach that level of success.

“There’s nothing wrong with that,” added the banker. “We regularly go through periods like that, in particular following days and weeks of heavy issuance, and for now we have sort of run out of steam.”

The Caisse Française de Financement Local (Caffil) mandate was announced this morning and leads BBVA, BNP Paribas, Citi, ING and Natixis opened books with initial price thoughts of the mid-swaps plus 14bp area for the euro benchmark-sized May 2034 public sector social obligations foncières, expected ratings Aaa/AA+/AAA (Moody’s/S&P/DBRS). After three-and-three-quarter hours, they fixed the spread at 12bp for a €500m size on the back of a final book good at re-offer of above €700m, including €50m of joint lead manager interest.

“It was extremely brave going out at the long end,” said a syndicate banker away from the leads, “with the last couple of trades there having been heavy-lifting.”

He noted that the book and deal size were at the smaller end of typical Caffil issuance, and said the starting point for the pricing suggested that size had not been a priority – he saw fair value at 9bp or marginally tighter, implying a premium at guidance of around 5bp, which is lower than seen recently. According to pre-announcement comparables circulated by the leads, Caffil May 2032s were trading at 7.25bp, mid, January 2034s at 8.5bp, and January 2035s at 10.5bp, while SG SFH May 2034s issued on 26 April at 13bp were at 8.5bp.

Banco Sabadell’s deal was launched after a mandate announcement yesterday. After going out with guidance of the 18bp area for the euro benchmark seven year cédulas hipotecarias, leads BNP Paribas, Commerzbank, Goldman Sachs, HSBC and Santander priced a €1bn deal at 16bp on the back of books above €1.15bn, including €75m of JLM interest.

Syndicate bankers away from the leads were surprised at the size being set so close to the book size in combination with the spread having been moved 2bp tighter.

“It was a bit of an odd trade,” said one. “It’s not a name I would expect to fit into this fragile market, and to derisk it, I probably would have gone for something shorter.”

After a mandate announcement yesterday, Hamburg Commercial Bank (HCOB) leads Barclays, Commerzbank, Danske, Deutsche and JP Morgan opened books with guidance of the 23bp area for the German’s €500m no-grow May 2025 Schiffspfandbrief, expected rating A2. After around two hours and 10 minutes, they reported books above €625m, including €170m of JLM interest, and after a little over three hours, guidance was revised to 20bp-22bp, will price in range, on the back of books above €685m. After around four-and-a-half hours, the spread was ultimately set at 22bp.

“It’s not a bond for everyone,” said a banker at one of the leads, “but we were oversubscribed with a decent book and some quite nice orders – albeit with good JLM support and the Bundesbank doing its job.”

He said around 30 accounts were involved, while others were positive on the HCOB name but not the collateral. Opinions on fair value differed, given the lack of ship covered bonds outstanding, although HCOB senior paper and other Pfandbriefe, plus Danish Ship Finance covered bonds provided pointers, according to the lead banker, who said fair value could be seen in the mid-teens.

“If you are doing something off the beaten track, there is always a bit of price discovery, and at the end of the day you need to give investors some guidance,” he said. “So we went out with the IPTs of 23bp, with the issuer knowing full well that on a project like this we may end up at or around that level.”

Raiffeisenverband Salzburg leads Erste, DZ, LBBW and RBI went out with guidance of the 13bp area for the €300m no-grow May 2027 mortgage covered bond, expected rating Aaa. After around an hour and three-quarters, they reported books above €500m, including €60m of JLM interest, and after around two hours and 20 minutes set the spread at 11bp on the back of books above €550m. The final order book good at re-offer was above €470m, including €30m JLM interest.

A lead banker said the outcome of the issuer’s inaugural covered bond compared favourably to the rest of the day’s supply, given its bit-to-cover ratio and the issuer’s ability to tighten pricing 2bp. He put fair value at around 7bp over.

Equitable Bank leads Barclays, DZ, LBBW, Scotiabank and TD opened books with guidance of the 20bp area for the May 2025 Canadian covered bond with an expected size of €300m and expected ratings AA/AA (Fitch/DBRS). After around two hours and 50 minutes, they set the spread for a €300m (C$404m) size at 20bp on the back of books above €300m, including €20m of JLM interest.

A syndicate banker at one of the leads said the deal had proven more difficult than the issuer’s debut in September 2021, when it sold a €300m three year. That September 2024 issue was trading at around 12bp, pre-announcement, and the lead banker put fair value for the new issue at around 14bp.