A Credito Emiliano €500m seven year OBG struggled today (Tuesday), but Swedbank was able to build on a successful LF five year trade yesterday with a larger, €1bn deal at the same spread, as the shorter end again proved more dependable than further out the curve.

After a mandate announcement yesterday (Monday), Credito Emiliano (Credem) leads Barclays, BNP Paribas, Crédit Agricole, Natixis and UniCredit opened books with guidance of 20bp-22bp over mid-swaps for the €500m no-grow seven year OBG, expected ratings Aa3/AA (Moody’s/Fitch). They ultimately priced the new issue at the wide end of the range, 22bp, after providing an update that books were above €500m, with €175m of this being joint lead manager interest, and likely including a €150m CBPP3 order, according to a syndicate banker away from the leads, given the time that had elapsed between books being opened and the update being towards midday CET.

“Apparently it was hard work, to say the least,” said another banker away from the leads. “They started somewhat unusually with the 20bp-22bp, will price in range, to indicate from the start that 20bp was the furthest they would go, but that didn’t seem to help them because they had to price at the upper end, and at that level it was just covered.

“So definitely another good illustration of how things are going – or not going – at the moment.”

Another banker away from the leads put fair value at around 15bp, implying a new issue premium of some 7bp.

Swedbank Mortgage leads DZ, HSBC, LBBW, Natixis and Swedbank opened books this morning with guidance of the mid-swaps plus 9bp area for a euro benchmark-sized May 2027 covered bond, expected ratings Aaa/AAA (Moody’s/S&P). After around 55 minutes, they reported books above €1bn, excluding joint lead manager interest, and after close to three hours, the spread was set at 6bp on the back of books above €1.45bn, including €80m of JLM interest. The deal was ultimately sized at €1bn (SEK10.5bn) on the back of orders above €1.5bn.

“This was a successful transaction,” said a banker at one of the leads. “As we know, the market is no longer as reliable as it was a few weeks ago – we have seen a lot more supply and that has made people a bit slower in responding to new issues, which leads to books building more slowly.

“But this was the right name, the right jurisdiction, the right maturity – and at the right price. €1bn at 6bp offers value to everyone involved.”

Swedbank’s deal comes after compatriot Länsförsäkringar Hypotek (LF Hypotek) issued the most successful of three euro benchmarks yesterday, a €500m five year. Demand reached some €1bn within an hour of initial guidance of the 10bp area being released for the €500m no-grow trade, and guidance was then revised to 7bp+/-1bp, WPIR, on the back of some €1.25bn of orders. The spread was ultimately set at 6bp on the back of around €1.3bn of demand, with some €1.2bn good at re-offer.

LF’s deal was seen as offering a new issue premium of 3bp and Swedbank’s, 4bp, the latter based on a SEB June 2027 issue launched in March trading at 2bp, mid, according to the lead banker. He noted that Swedbank’s deal was twice the size of LF’s, saying Swedbank’s stronger name explained its ability to achieve this.

“It can be taken for granted that if they had limited themselves to a smaller trade, 5bp would have been possible, but that was not on the cards,” he said. “Swedbank is in a different league and €500m would have been punching below their weight.”

Another lead banker said that pricing 1bp tighter or wider was also a minor consideration given that Swedbank was able to achieve pricing some 15bp inside what is available in its domestic market, noting that this explained the Swedes’ willingness to issue in five years when they typically tap euros for longer maturities than are readily available in Swedish kronor.

He said Swedbank mandated at short notice after the success of LF’s trade, with the latter having been awaited for some time. Swedbank had been targeting an issue by the end of June, ahead of its black-out period, but also accelerated its plans in view of possible Canadian supply next week.

“They have printed €20bn or so already this year, but our understanding is that they are not done yet,” he said. “Their numbers come out mid to end this week, so next week is a potential window for Canada and they might come wide, if you look at where they have priced recently.

“That put the pricing of Swedbank and similar names at risk.”

The two five year trades outperformed longer-dated issuance from DZ Hyp and Crédit Agricole Home Loan SFH yesterday.

DZ Hyp priced its €750m nine year mortgage covered bond at mid-swaps plus 5bp on the back of a final book of around €860m, including €75m of JLM interest. The pricing was tightened 2bp from guidance of the 7bp area, with the size set after a little over two hours, when the guidance was revised to 5bp+/-1bp, will price in range, on the back of books above €980m, including €45m of JLM interest, and the peak book size was above €1bn, including €75m of JLM interest. Bankers put the new issue premium at 4bp.

Crédit Agricole Home Loan SFH tightened pricing just 1bp from initial guidance of the 11bp area to a re-offer of 10bp for its €1bn eight year covered bond, which bankers said reflected a new issue premium of 5bp-6bp. A first update after around two hours had put demand above €1bn, before guidance was revised to 11bp+/-1bp, WPIR, on the back of books above €1.45bn, including €150m of JLM interest, and the final spread was ultimately set on the back of books above €1.55bn, including €175m of JLM interest.

A syndicate banker involved in yesterday’s supply said longer maturities remain more challenging.

“They followed more or less the same pattern: both started 6bp-7bp wide of fair value, and both of them had an uphill battle to get towards what they had been hoping for. In the end, they went slightly different routes, with Crédit Agricole apparently going for €1bn and so they limited themselves to taking only 1bp off the table. For DZ Hyp, it was more of a mixed calculation – they definitely appreciated the 2bp performance, but were willing to conceded 1bp for the larger than minimum size.

“But again, both transactions are good evidence that it’s no longer smelling of roses here.”

Landesbank Saar also sold an inaugural, sub-benchmark social public sector Pfandbrief today after a mandate announcement yesterday. Leads Helaba, LBBW and UniCredit this morning opened books with guidance of the 12bp area for the €250m no-grow May 2032 issue, expected rating AAA (Fitch). After around an hour, they reported books in excess of €250m, excluding JLM interest, and after around two hours and 20 minutes, they revised guidance to 11bp+/-1bp, WPIR, on the back of books above €318m, including €25m of JLM interest. The deal was ultimately priced at 11bp on the back of books above €340m.

And after a mandate announcement yesterday, Oberösterreichische Landesbank (Hypo Oberösterreich) became the latest Austrian to hit the market this morning. Leads BayernLB, Deutsche, Erste and RBI opened books with guidance of the 15bp area for the €250m no-grow June 2029 mortgage covered bond, expected rating AA+ (S&P). After around an hour and 10 minutes, they reported books above €250m, excluding JLM interest, and after close to two hours they set the spread at 15bp on the back of books above €280m, excluding JLM interest. The final book at re-offer was above €300m, including €5m of JLM interest.

Bank of Queensland is holding investor calls today and tomorrow ahead of a planned five year euro benchmark conditional pass-through (CPT) covered bond. BNP Paribas, Commerzbank, ING, NAB and UBS have the mandate, which was announced yesterday.

The planned issue will be only the second euro benchmark covered bond from Bank of Queensland, following a €500m (A$750m) five year debut in May 2019.

Syndicate bankers expect the primary market to now remain quiet until next week, with Ascension Day public holidays in many parts of Europe on Thursday and the window having likely passed for CBPP3-eligble issuers to print deals settling in May, thereby avoiding the risk of facing a cut in Eurosystem orders for trades settling in June.

“Maybe a break is in everyone’s interest,” said one. “We’ve seen each day bring another 5%-10% loss in momentum, so let’s step away for a few days and give the market the opportunity to digest what has been issued so far.”